COBRA obliges covered employers to offer continuation of group health coverage after certain events. The statute is not conceptually difficult; the risk lies almost entirely in notice obligations and deadlines, which are precise and strictly enforced.
COBRA generally applies to group health plans maintained by employers with 20 or more employees on more than 50 percent of typical business days in the preceding calendar year. Both full and part-time employees count toward the threshold, with part-time employees counted as a fraction.
Smaller employers are frequently subject to state continuation laws — often called "mini-COBRA" — which impose similar but not identical obligations. An employer below the federal threshold is not necessarily free of continuation requirements.
Group health plans, including medical, dental, vision, health FSAs and certain employee assistance programs. Life insurance and disability coverage are not group health plans for this purpose.
For the employee: termination of employment for reasons other than gross misconduct, or a reduction in hours causing loss of coverage.
For a spouse or dependent child: those same events, plus the employee's death, divorce or legal separation, the employee becoming entitled to Medicare, or a child ceasing to qualify as a dependent.
Each affected person is a qualified beneficiary with an independent right to elect — one of the most frequently mishandled aspects of the statute.
This is where compliance is won or lost.
Must be provided to covered employees and spouses when coverage begins, describing COBRA rights. Employers who never issue this are already non-compliant before any qualifying event occurs.
The employer must notify the plan administrator of qualifying events within the required period — commonly 30 days for events such as termination, reduction in hours, death or Medicare entitlement.
The plan administrator must provide the election notice to qualified beneficiaries within the required period after being notified of the event.
Where continuation is not available, or where it terminates early, specific notices are required. These are widely overlooked.
Beneficiaries also have notice obligations — for divorce, legal separation or a child losing dependent status, the beneficiary must notify the plan within the plan's stated timeframe.
Continuation runs for a defined maximum period depending on the qualifying event, with extensions available in defined circumstances including disability. Plans may generally charge up to 102 percent of the applicable premium, with a higher percentage permitted during a disability extension.
Outsourcing administration does not outsource liability. The employer remains responsible for notifying the administrator of qualifying events promptly and accurately — and that handoff is the single most common point of failure, because it depends on HR and payroll telling the administrator something happened.
Audit the handoff periodically: take a sample of terminations and confirm each generated a timely notice with evidence of delivery.
Where a third-party administrator handles COBRA, the employer's residual obligation is to notify them of qualifying events accurately and promptly. That single handoff is where most compliance failures originate, because it depends on HR or payroll recognizing an event and passing it on.
An annual audit closes the gap: take a sample of terminations and reductions in hours from the past year, and confirm each generated a timely notice with evidence of delivery. Failures found this way are correctable; failures found by a claimant are not.
Notices are generally sent to the last known address, and the burden of showing they were sent falls on the plan. Employers who do not update addresses at termination — the precise moment an employee is most likely to move — create a predictable problem.
Capturing a forwarding address as part of the exit process is a small step that materially improves the defensibility of every notice that follows.
Not federally below the threshold, but state continuation laws frequently apply.
Only for gross misconduct, which is narrowly construed. Take advice before relying on it.
Generally the qualified beneficiary, up to the permitted percentage of the applicable premium.
See COBRA election and payment rules and how to bill for COBRA premiums. For full training, see the COBRA training and certification program.
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