COBRA is the acronym for the Consolidated Omnibus Budget Reconciliation Act of 1986. According to the U.S. Department of Labor, the landmark legislation provides for continuation of group health coverage that otherwise might be terminated.
COBRA provisions give certain former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of their health care coverage.
Employers with 20 or more employees are usually required to offer COBRA coverage and notify the employee of its availability. Employees must have been terminated to qualify for COBRA.
It usually costs more than health coverage for active employees and can be comparable to individual rates. COBRA participants pay for the entire premium themselves, so an employee who contributed $300 per month to his company-paid premiums might now have to pay $1,000 because the employer was covering 70 percent of the costs. Thus, COBRA generally doubles or triples the price of a premium because the employee was only paying partial cost. For workers at most large companies, that is between 20-25 percent, according to benefits consulting firm Hewitt Associates.