Does my severance agreement affect my health insurance — what happens to COBRA?
The short answer
Under federal COBRA law, job loss (other than for gross misconduct) is a qualifying event that generally entitles covered employees and their families to continue group health coverage for up to 18 months — at the full premium cost, which is typically higher than what you paid as an active employee. DOL guidance confirms that employers sometimes include a temporary COBRA subsidy in a severance or separation agreement to reduce that cost, but this is not required. Whether your severance agreement includes a COBRA subsidy, how long it lasts, and what conditions end it early are all in the agreement language. Scan yours to see what it says about health coverage before you sign.
What Dang reviews here: Dang reviews the clause language in your severance agreement — what the COBRA subsidy, release, non-compete, and non-disparagement terms say and what to ask about them. It does not verify wage, hour, or leave compliance.
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What COBRA and the severance agreement usually do together
COBRA — the Consolidated Omnibus Budget Reconciliation Act — is a federal law that allows workers and their families to temporarily continue group health coverage after a qualifying event such as job loss. DOL guidance reports that the standard COBRA period for job loss or reduction in hours is 18 months, and that you generally pay the full premium (both your share and the employer's former contribution) plus an administrative fee of up to 2%. For many workers, this cost is a significant jump from what they paid while employed.
A severance agreement sometimes includes a clause where the employer agrees to pay part or all of the COBRA premium for a stated period — commonly one to six months. DOL guidance notes this is not legally required. The severance agreement is where the subsidy lives: whether it is offered, for how long, under what conditions it ends (e.g., if you start a new job), and how payment is structured are all in the clause language.
Why people worry
Health coverage is often the most urgent practical concern after a layoff, and the gap between active-employee premium costs and full COBRA costs surprises many workers. People also report not noticing whether a COBRA subsidy clause is in the severance agreement — and signing without asking, then paying full premium for months when a subsidy might have been negotiable.
What to look for in your agreement
- Whether any COBRA subsidy is included — and the exact monthly amount or percentage the employer will pay.
- How long the subsidy lasts, and whether it ends early if you become eligible for other coverage.
- The COBRA election deadline — DOL guidance states you generally have 60 days to elect COBRA after losing coverage or receiving the election notice, whichever is later.
- Whether the subsidy requires you to remain cooperative or fulfill other conditions after separation.
- What happens to the subsidy if your employer stops offering a group health plan.
Questions to ask before signing
- Ask the employer whether a COBRA subsidy is available and for how many months it would be paid.
- Ask the other party to clarify what triggers early termination of any COBRA subsidy.
- Confirm the COBRA election deadline and how you will receive the election notice.
- Consider having the agreement reviewed if the health coverage gap represents a significant cost over the severance period.
Why scan instead of guess
The general rule tells you the baseline. Your offer tells you what you’re actually being asked to sign — and the wording is what binds. Dang reads the document and flags the clauses worth reviewing, in plain English.
The deterministic engine scores and decides what’s risky. The AI only enriches the plain-English wording — AI extracts, code decides, never the other way around.
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Common questions
How long can I keep COBRA coverage after a layoff?
DOL guidance reports that COBRA coverage for job loss generally lasts up to 18 months, with potential extensions in the case of disability or a second qualifying event. The full premium is the employee's cost unless the severance agreement includes a subsidy.
Is a COBRA subsidy in a severance agreement required by law?
No — DOL guidance states that employer COBRA subsidies in severance agreements are not legally required; some employers offer them voluntarily or through negotiation. Whether your agreement includes one depends on its language.
Sources
- U.S. Department of Labor — FAQs on COBRA Continuation Health Coverage for Workers (official agency guidance) · official source
- Sources last checked 2026-06-11. Laws and market practices change — confirm current rules before relying on them.
No account required · File deleted after analysis · Not legal advice. Dang reports contract findings in plain English — general information, not legal advice about your situation. For consequential decisions, consult a licensed attorney in your state.