How much does COBRA cost in California after being fired?

Under COBRA, you pay the full premium your employer was paying plus a 2% administrative fee. For a family plan in the Los Angeles area, this typically ranges from $1,500 to $2,500 per month. Your employer must provide the exact cost in the COBRA election notice sent within 14 days of termination.

Is employer-paid COBRA in a severance agreement taxable?

Generally, no. When the employer pays COBRA premiums directly, the payments are typically not taxable to you. This is why it's better to negotiate employer-paid COBRA as a separate benefit rather than receiving additional cash to cover insurance costs, which would be taxed as ordinary income.

Can I choose Covered California instead of COBRA after being fired?

Yes. Losing employer coverage creates a Special Enrollment Period for Covered California marketplace plans. Depending on your post-termination income, you may qualify for subsidies that make marketplace coverage cheaper than COBRA. You have 60 days from your loss of coverage to enroll.

COBRA and Health Insurance in Your Severance Agreement: What LA Employees Should Know

Losing your health insurance is often the most immediate, concrete fear when you get fired. The severance payment helps long-term, but what about the prescription you need filled next week or the specialist appointment your kid has next month? Here's how health insurance works after termination in California and what Los Angeles employees can negotiate.

COBRA: What You Get Automatically

COBRA (the Consolidated Omnibus Budget Reconciliation Act) gives you the right to continue your employer's group health plan for up to 18 months after termination. This is a federal right that applies regardless of whether you sign a severance agreement.

California also has Cal-COBRA, which extends coverage for an additional 18 months (up to 36 months total) for employees of smaller employers (2-19 employees) or after federal COBRA expires.

The catch: you pay the full premium. While you were employed, your employer likely paid 50-80% of your health insurance premium. Under COBRA, you pay the entire amount, plus a 2% administrative fee. For a family plan in the Los Angeles area, that can easily be $1,500 to $2,500 per month.

What Your Severance Agreement Can Add

COBRA is your baseline. Your severance agreement can improve on it significantly:

Employer-paid COBRA premiums. The best scenario. Your employer continues paying their share (or all) of the premium for a negotiated period. Three to six months of employer-paid COBRA can be worth $5,000 to $15,000 or more. This is often the most valuable non-cash benefit in a severance package.

A cash stipend for health insurance. Some employers prefer to give you a lump sum to cover health insurance costs rather than continuing to administer COBRA payments. This gives you flexibility to choose COBRA, a Covered California plan, or a spouse's plan.

Extended coverage period. While COBRA provides 18 months, your employer can agree to continue paying premiums beyond that period, or they can structure the coverage differently through their group plan.

Alternatives to COBRA

COBRA isn't always the best option, even if your employer is paying for it:

Covered California (ACA marketplace). If you lose employer coverage, you qualify for a Special Enrollment Period on the state marketplace. Depending on your income (which may be lower post-termination), you might qualify for subsidies that make marketplace coverage cheaper than COBRA.

Spouse's or partner's plan. Your termination creates a qualifying event that allows you to enroll in a spouse's or domestic partner's employer plan outside of open enrollment.

Medi-Cal. If your income drops significantly, you may qualify for California's Medicaid program. There's no premium and coverage is comprehensive.

How to Negotiate Health Benefits in Your Severance

Calculate the real cost. Before negotiating, find out exactly what COBRA will cost you. Your employer must send you a COBRA election notice within 14 days of your termination, which will include the premium amount. Use this number in your negotiation.

Ask for employer-paid COBRA as a separate line item. Don't let it get rolled into the severance payment. If the company pays COBRA premiums directly, those payments are generally not taxable to you. If they give you cash to cover it, the cash is taxable income, and you effectively lose 30-40% to taxes.

Push for at least three to six months. This is a reasonable ask and a common outcome in severance negotiations. It bridges the gap while you find new employment and new coverage.

Don't forget dental and vision. COBRA covers all benefits you had under the employer's plan, including dental and vision. Make sure any employer-paid COBRA negotiation covers these too.

Timeline and Deadlines

After termination, you have 60 days to elect COBRA coverage. Coverage is retroactive to your termination date, so if you have a medical need during that 60 days, you can elect COBRA and the coverage will apply.

Don't let the COBRA election deadline pass while you're still deciding whether to sign the severance agreement. COBRA election and severance agreement signing are separate decisions with separate timelines.

Get Health Benefits Into Your Agreement

Health insurance continuation is one of the most overlooked and most valuable parts of a severance negotiation. If your employer isn't offering it, ask. If they're offering one month, push for three or six. The money you save on premiums can be worth more than an equivalent increase in the cash severance.

Contact our employment team for a free severance agreement review. We help employees throughout Los Angeles get their health insurance needs addressed along with every other aspect of their agreement.