Federal COBRA and Texas state continuation let you keep your employer’s health plan after a job loss or similar event, but which one applies depends on your employer’s size, and both carry tight deadlines. Here is how COBRA works in Texas: if your former employer had 20 or more employees, federal COBRA lets you continue coverage for up to 18 months; if the company was smaller, Texas Insurance Code Chapter 1251 offers a shorter continuation of up to nine months. Either way, you pay the full premium yourself, you have 60 days to elect, and you have 45 days after electing to send the first payment.
Which Law Applies to You
Your employer’s headcount decides the rulebook.
Federal COBRA covers private-sector employers that had at least 20 employees on more than half of their typical business days in the previous calendar year. Both full-time and part-time employees count, with part-timers counted as a fraction based on hours worked.1U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Employers and Advisers
If your employer had fewer than 20 employees, Texas Insurance Code Chapter 1251 provides a state-level alternative often called “mini-COBRA.” Texas defines a small employer as a business with 2 to 50 employees, but because federal COBRA already covers those with 20 or more, the Texas law is primarily relevant for companies with 2 to 19 workers.2State of Texas. Texas Insurance Code 1251.051 – Employers To qualify for Texas continuation, you must have been continuously insured under the group policy for at least three consecutive months immediately before coverage ended.3State of Texas. Texas Insurance Code 1251.252 – Eligibility for Continuation of Group Coverage
Government plans and church plans may follow separate continuation rules.
What Triggers Continuation Rights
For the employee, the two federal qualifying events are termination of employment for any reason other than gross misconduct, and a reduction in work hours that causes a loss of plan eligibility.1U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Employers and Advisers Texas mini-COBRA covers termination of coverage for any reason other than involuntary termination for cause.3State of Texas. Texas Insurance Code 1251.252 – Eligibility for Continuation of Group Coverage
Your spouse and dependent children have their own independent rights to elect federal COBRA when any of these events occur:
- Death of the covered employee
- Divorce or legal separation from the covered employee
- The employee’s enrollment in Medicare
- A child aging out of dependent status under the plan
Federal COBRA does not define “gross misconduct,” and no regulation sets a bright-line test. Ordinary firings for excessive absences or generally poor performance typically do not rise to that level.5U.S. Department of Labor. Gross Misconduct If your employer denies COBRA on this basis, you can challenge the decision through the Department of Labor or in court.
The Deadlines You Have to Hit
Several clocks run at once, and missing any of them can end your right to coverage.
Notice from the Plan
For most qualifying events, your employer has 30 days to notify the plan administrator, and the administrator then has 14 days to send you an election notice describing your options, the cost, and how to enroll.6U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Workers For events the employer might not know about, such as a divorce or a child aging out, you or a family member must notify the plan administrator directly.
Your 60 Days to Elect
Once you receive the election notice, you have at least 60 days to decide. The clock starts on the later of the day you receive the notice or the day your coverage would otherwise end.7Centers for Medicare & Medicaid Services. COBRA Continuation Coverage Questions and Answers Texas mini-COBRA uses the same 60-day election window.8Texas Department of Insurance. 28 Texas Administrative Code 21.5312 – Continuation Election and Effective Dates
First Payment: 45 Days
You do not send money with the election form. Your first premium must reach the plan administrator within 45 days after the date you elect, and it is retroactive to the day your regular coverage ended.6U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Workers Missing the 45-day deadline can permanently terminate your right to continue the policy. Texas mini-COBRA applies the same 45-day deadline.9Texas Department of Insurance. 28 Texas Administrative Code 21.5313 – Continuation Premium
Monthly Payments After That
Each subsequent premium is due on the plan’s monthly schedule, with a 30-day grace period. If you pay inside the grace window, the plan may suspend your coverage temporarily and reinstate it retroactively when payment arrives.10U.S. Department of Labor. An Employee’s Guide to Health Benefits Under COBRA Missing the 30-day grace period ends your coverage permanently.
What It Costs
Under both federal COBRA and Texas continuation, you pay the full cost of the group plan: the share you used to pay plus the share your employer covered. Federal COBRA lets the plan add a 2 percent administrative surcharge, so the total runs up to 102 percent of the plan’s cost.1U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Employers and Advisers If your employer paid $400 of a $500 monthly premium while you paid $100, your new COBRA bill is $510 a month.
The one exception is a disability extension. For the additional 11 months beyond the standard 18, the plan can charge up to 150 percent of the total cost.1U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Employers and Advisers
If you have a Health Savings Account, you can withdraw funds tax-free to pay COBRA premiums; the IRS lists continuation coverage as a qualifying insurance expense for HSA distributions.11Internal Revenue Service. Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
How Long Coverage Lasts
Federal COBRA caps vary by event and recipient:
- 18 months for the employee, spouse, and dependents when the qualifying event is termination of employment or a reduction in hours.
- 29 months when a qualified beneficiary is determined to be disabled by Social Security within the first 60 days of COBRA coverage, extending the standard 18 months by 11.
- 36 months for the spouse and dependents when the qualifying event is the employee’s death, divorce or legal separation, Medicare enrollment, or a child’s loss of dependent status.
Texas state continuation under Chapter 1251 is shorter, generally capping at nine months, with no discretionary extensions by the employer or insurer.
When Coverage Can End Early
Continuation coverage can stop before you hit the maximum period if any of the following happens:
- You miss a premium payment and the 30-day grace period passes.
- Your former employer stops offering any group health plan to active employees, leaving nothing to continue under.
- You become covered under another group health plan after electing COBRA.
- You enroll in Medicare after electing COBRA.
If the employer closes but a successor company maintains a group plan, you may be eligible under that replacement plan.
If You Are Near 65: The Medicare Trap
COBRA does not count as “coverage based on current employment” for Medicare Part B enrollment. Your eight-month window to enroll in Part B without a penalty starts when you stop working or lose employer-sponsored coverage, whichever comes first, regardless of whether you elect COBRA.12Medicare.gov. COBRA Coverage
Miss that window while leaning on COBRA and you cannot sign up for Part B until the next general enrollment period, which runs January through March, with coverage not starting until July. You will also face a late enrollment penalty of 10 percent added to your Part B premium for each full 12-month period you were eligible but did not enroll, and that penalty lasts for life.13Medicare.gov. Avoid Late Enrollment Penalties
Once you enroll in Medicare, your COBRA coverage will generally end. If you are already Medicare-eligible when a qualifying event occurs, enrolling in Medicare and adding a Medigap policy is typically cheaper than paying 102 percent for COBRA.
The Marketplace May Beat COBRA on Price
Losing job-based coverage triggers a 60-day special enrollment period on the Health Insurance Marketplace, letting you buy individual or family coverage outside the normal open enrollment window.14HealthCare.gov. Getting Health Coverage Outside Open Enrollment
Even if you qualify for COBRA, you can turn it down and still be eligible for premium tax credits on the Marketplace. The IRS treats COBRA as coverage you are allowed to decline without losing credit eligibility, unlike most active employer-sponsored plans.15Internal Revenue Service. Questions and Answers on the Premium Tax Credit Depending on your household income, those credits can push your monthly premium well below the 102 percent COBRA figure.
Before you commit to COBRA, compare the full monthly cost against a Marketplace plan with any tax credits you qualify for, and check that the Marketplace plan’s network includes the doctors you need. If you are mid-treatment and your current providers are only in the employer plan’s network, COBRA may still be worth the higher price for the short term.