What Health Coverage Really Costs After a Los Angeles Termination
Key Takeaways: Under federal COBRA, your former employer’s plan can generally charge you up to 102% of the full health insurance premium, and the employer contribution you had while working typically goes away. For Los Angeles high earners with family coverage, that can add up to thousands of dollars a month and more than $45,000 over 18 months. California’s continuation coverage statutes point the same way: you generally keep coverage only if you keep paying premiums, so the full cost usually falls on you unless your severance or an employer policy says otherwise. A COBRA premium subsidy is often one of the more achievable severance terms, and you can often negotiate how long it lasts and how it is paid. Negotiate health coverage alongside equity, commissions, bonuses, and any possible wrongful termination claim. Don’t sign too quickly or miss the COBRA election deadline.
Losing your job often also means losing the employer contribution that kept your health insurance affordable. Under federal COBRA, your former employer’s plan can generally charge you up to 102% of the full premium: the entire cost of coverage plus up to a 2% administrative charge. For Los Angeles high earners with family coverage, that can mean thousands of dollars a month just as your paycheck stops. That is why a COBRA premium subsidy in your severance package belongs in your negotiation alongside base pay, bonuses, commissions, and equity.
If you have already been fired and received a severance offer, you do not have to guess what it is worth. RD Law Group APC works with executives, startup employees, and commission-based professionals to look at what an offer leaves out. Call (424) 535-1500 or contact us now to talk through your situation.
Why COBRA’s 102 Percent Premium Hits High Earners Hard
Federal law sets the COBRA 102 percent premium, and it is the ceiling in most cases. Under 29 U.S.C. § 1162(3), a plan may generally charge qualified beneficiaries up to 102% of the "applicable premium." During the 11-month disability extension, the plan may charge up to 150%. Federal COBRA generally applies to employers with 20 or more employees, and it does not cover church plans or, in general, federal government plans. While you were employed, your company probably paid most of the premium. After termination, the entire cost generally shifts to you.
The Math Most Departing Employees Miss
Many employees never see the full price of their coverage until the COBRA election notice arrives. Suppose a family plan costs $2,500 a month in total and you paid $500 through payroll. Your new bill could be up to $2,550 a month. Over 18 months, that adds up to more than $45,000. Your cost depends on your specific plan and can change when the plan’s rates change, so read your election notice carefully.
California’s Cal-COBRA Layer
California adds its own continuation rules through Cal-COBRA. Health and Safety Code § 1366.20 et seq. and Insurance Code § 10128.50 et seq. generally cover employees of employers with 2 to 19 employees and insured group plans. Cal-COBRA can extend coverage to a total of up to 36 months for some people whose federal COBRA ran out after 18 months. Premiums can be up to 110% for regular coverage and up to 150% during some extended periods. Self-funded plans generally are not subject to Cal-COBRA.
California Law Confirms the Cost Falls on You Unless Someone Negotiates It Away
California statutes indicate that ongoing continuation coverage generally depends on paying premiums. Insurance Code § 10116.5 deals with continuation coverage for certain beneficiaries, such as some former spouses, after COBRA or Cal-COBRA ends. That coverage generally requires premium payments to the insurer, and failing to pay may end it. You can review these provisions in the California Insurance Code.
Health and Safety Code § 1373.621 applies a similar principle to health care service plans. Once COBRA or Cal-COBRA ends, certain qualified beneficiaries may keep coverage only by paying premiums directly to the plan. Unless your severance package shifts some of this burden back to the employer, you may carry the full continuation coverage cost.
Negotiating a COBRA Premium Subsidy in Severance
Employer-paid COBRA is often one of the most common and achievable items in a severance negotiation. Many employers treat it as a routine add-on, but the amount and length of the subsidy are often negotiable.
A COBRA premium subsidy in severance generally takes one of several forms.
- Direct payment of COBRA premiums to the plan for a set number of months
- A lump-sum payment equal to several months of premiums, which you can use however you choose
- Reimbursement of premiums you pay, usually until you find new coverage
- A subsidy that ends early once you become eligible for a new employer’s plan
Each structure may have practical and tax consequences. Lump-sum cash payments are generally taxable income and are often reported as wages. Tax treatment of direct premium payments or reimbursements depends on how they are structured, and some structures can raise nondiscrimination issues for the employer. Talk to a tax advisor before you choose.
💡 Pro Tip: Ask for the subsidy period to match the length of your job search, not an arbitrary three months. Senior roles in Los Angeles often take longer to fill, and you can use that reality in your negotiation.
Health Coverage Is Only One Piece of Your Severance Value
For Los Angeles high earners, health coverage usually sits alongside much larger financial stakes. Unvested equity, pending commissions, and near-payout bonuses often make up the bulk of what you could lose or recover. A strong severance negotiation looks at all of them together.
Equity, Commissions, and Bonus Timing
Timing is often where the leverage is. If you were fired weeks before a vesting cliff or a bonus payout, that timing may support a request for accelerated vesting or a prorated bonus. Equity and bonus rights generally depend on your plan documents and grant terms. California Labor Code § 2751 generally requires commission agreements to be in writing and to explain how commissions are calculated and paid. Labor Code §§ 201 and 203 generally require all earned wages, including earned commissions, to be paid immediately when you are fired. Waiting-time penalties of up to 30 days’ wages may apply if the employer willfully fails to pay. For benchmarks on typical packages, see our guide on how much severance you can negotiate.
| Severance Item | What You May Lose | What You May Negotiate |
|---|---|---|
| Health coverage | Employer premium share | Employer-paid COBRA for set months |
| Equity | Unvested shares or options | Accelerated vesting, extended exercise window |
| Commissions | Pending or unpaid deals | Payment on closed or pipeline deals |
| Bonus | Payout you were fired shortly before | Prorated or full bonus |
When Suspicious Timing Signals a Wrongful Termination Claim
Some terminations involve more than a business decision, and that can change your leverage. A mean or unfair boss generally does not create a legal claim by itself. California employment is generally at-will, and a termination is generally unlawful only if it violates a law, contract, or public policy. Suspicious timing can be a red flag, although timing alone may not prove a claim. Examples include being fired shortly after filing a workers’ compensation claim (Labor Code § 132a), returning from protected leave under CFRA (Government Code § 12945.2), or raising a safety concern (Labor Code § 6310). Discrimination and retaliation claims under the Fair Employment and Housing Act (Government Code § 12940) generally require filing a complaint with the Civil Rights Department within three years (Government Code § 12960). If this sounds like your situation, a COBRA premium subsidy severance lawyer can help you judge whether a potential claim gives you more room to negotiate.
Mistakes That Cost Departing Employees Money
One of the most expensive mistakes can be signing too quickly. Severance agreements usually include a release of claims. Once you sign, you may give up legal rights, although some rights cannot be waived, such as certain wage claims and unemployment and workers’ compensation benefits. Under the Older Workers Benefit Protection Act (29 U.S.C. § 626(f)), employees 40 and older generally get 21 days to consider an individual offer, or 45 days in a group layoff, and 7 days to revoke after signing.
Another common mistake is missing the COBRA election window. You generally have at least 60 days from the later of losing coverage or receiving the election notice to elect COBRA. If you elect on time, coverage generally applies back to the date you lost coverage. You then generally have 45 days after electing to make your first premium payment.
💡 Pro Tip: Get your written COBRA election notice and your equity grant documents before you negotiate. Numbers from those documents carry more weight than estimates.
Frequently Asked Questions
1. Is my employer required to pay my COBRA premiums?
Generally, no. California and federal law generally do not require employers to subsidize COBRA. Employer-paid COBRA usually comes from negotiation, an employment contract, or an existing severance policy.
2. Can COBRA really cost more than I paid while employed?
Yes, in many cases. You may now pay the full premium plus up to 2%, instead of only your payroll share.
3. How long does COBRA coverage last?
Federal COBRA generally lasts up to 18 months. It may be extended to 29 months for disability or 36 months for certain secondary events affecting dependents. Cal-COBRA may add coverage up to 36 months total in some situations. Coverage can end early if you stop paying premiums or the employer ends all group health plans.
4. Is a lump-sum COBRA payment better than direct payment?
It depends. A lump sum gives you flexibility but is generally taxable. Direct payment may be simpler. Your personal tax situation matters here.
5. Does a potential wrongful termination claim affect my severance?
It may. If the timing of your firing suggests an unlawful motive, that can affect negotiations. However, results depend on specific facts and evidence.
Protecting Your Finances After Termination
Health coverage costs can quickly drain your savings after a termination. Given the COBRA 102 percent premium and California’s general rule that continuation coverage depends on continued premium payments, the cost generally falls on you unless you negotiate otherwise. A COBRA premium subsidy, combined with equity, commissions, and bonus terms, can make a real difference to your financial recovery.
Before you sign, find out what your severance offer might be leaving out. RD Law Group APC reviews severance packages for Los Angeles professionals and can help you identify your leverage. Call (424) 535-1500 or schedule your consultation today.
Disclaimer: This content is for informational purposes only and is not legal advice. Every case is unique, and results may vary. Consult an attorney about your specific circumstances.
