COBRA, or the Consolidated Omnibus Budget Reconciliation Act of 1985, is federal legislation that requires employers with more than 20 employees to allow employees who have left the company to continue their insurance in the company plan for a period up to 36 months. COBRA gives previous employees and their families the right to continue coverage that was provided by their group health plan. The employee is required to reimburse the employer for the cost of the insurance plus a 2 percent administrative fee.

People who are eligible for COBRA are voluntary or involuntary termination of employment for reasons other than misconduct, coverage for spouse after a death of covered employee, or divorce. Spouses are also eligible for COBRA if the covered employee becomes eligible for Medicare. Dependent children are eligible for COBRA is they lose dependent child status under the plan rules or their covered guardian suffers a death or layoff.

Exception: A revision to COBRA under the economic stimulus plan gives a 65% subsidy to workers who have lost or may lose their job between September 1, 2008 and December 31, 2009.