What does it mean?  If you lose or leave your job, COBRA provides you with temporary health insurance through your former employer. You have to pay for it, but you get the benefit at the same group-rate cost that your former employer paid. This benefit extends to former employees, retirees, spouses, former spouses, and dependent children. The name comes from the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA), which was passed by Congress and signed into law by President Reagan in 1986. Generally, employees who are voluntarily or involuntarily terminated for reasons other than gross misconduct qualify for COBRA coverage, as do employees who experience a significant reduction in their work hours. Employers with group health plans covering 20 or more employees are subject to COBRA.

COBRA benefits run a minimum of 18 months from the time a person loses a job, but companies can extend that period. Some states require COBRA coverage for employers with less than 20 employees and some require the benefits to run longer than 18 months. COBRA does not apply if employees lose their benefits coverage because the employer has terminated the plan altogether or if the employer has gone out of business.

Why the buzz? Some 1.2 million Americans lost their jobs through the first 10 months of 2008, according to the U.S. Department of Labor, and that was before a worldwide financial crisis had gotten under way in earnest. Most people still get their health insurance through their employer, which means the loss of a job also means the loss of health-care coverage. COBRA offers a temporary lifeline for people who lose their jobs, but it comes at a very steep price for many. That’s because a person who loses a job and qualifies for COBRA can be required to pay the full cost of staying in their former employer’s group health plan. Since most employers pay a part of the health-insurance premiums for their employees, the bill for COBRA coverage can be substantially higher than what the employee had been contributing while working–in many cases double the cost or more.