How to End COBRA Coverage and What to Do Next

The Consolidated Omnibus Budget Reconciliation Act (COBRA) offers a temporary extension of group health coverage for individuals and their families when coverage would otherwise end due to specific events, such as job loss, reduction in work hours, or other life changes. COBRA provides a temporary bridge for health insurance, generally lasting from 18 to 36 months, depending on the qualifying event. Individuals electing COBRA typically pay the full premium for coverage, along with an additional administrative fee, which can be up to 2% of the cost.

Voluntary Termination of Coverage

Individuals can actively choose to end their COBRA coverage through several direct actions. The most common method involves simply discontinuing premium payments. If a premium payment is not made in full by the end of its grace period, which is typically 30 days, the coverage can be terminated. This cessation of payments effectively signals a voluntary termination of the health plan.

Another way to voluntarily end COBRA is by formally notifying the COBRA administrator or plan sponsor in writing of the desire to terminate coverage.

Automatic Termination Events

COBRA coverage also ceases automatically under various circumstances, without requiring any action from the qualified beneficiary. One primary reason is reaching the maximum coverage period allowed by law, which is generally 18 months for termination of employment or reduction in hours. This period can extend to 29 months for individuals determined to be disabled by the Social Security Administration during the initial 60 days of COBRA coverage, or up to 36 months for certain “second qualifying events” like an employee’s death, divorce, or a dependent child losing eligibility.

COBRA coverage also ends if the employer ceases to maintain any group health plan for its active employees. If a qualified beneficiary becomes covered under another group health plan after electing COBRA, their COBRA continuation coverage can terminate early. However, mere eligibility for another plan does not trigger termination; the individual must actually enroll and become covered. Furthermore, if a qualified beneficiary becomes entitled to Medicare benefits after electing COBRA coverage, their COBRA coverage can be terminated early for that individual.

What Happens After Termination

When COBRA coverage ends, the primary implication is the loss of health insurance benefits previously provided by the plan. This cessation of coverage, whether voluntary or automatic, means individuals no longer have access to the health plan they maintained through COBRA. To avoid a gap in health insurance, it is important to seek alternative coverage options promptly.

The loss of COBRA coverage is considered a qualifying life event, which triggers a Special Enrollment Period (SEP) on the Affordable Care Act (ACA) marketplace. This SEP allows individuals to enroll in a new health plan outside of the annual open enrollment period. The special enrollment window typically extends for 60 days from the date COBRA coverage ends, providing an opportunity to select a new plan. It is important to note that voluntarily dropping COBRA or failing to pay premiums generally does not qualify for a Special Enrollment Period.