COBRA, and state continuation coverage
Who must offer COBRA, the notice clock from qualifying event to first premium, and the state continuation laws that reach smaller employers.
When someone leaves, their health coverage does not have to end the same day. COBRA gives an employee and their family the right to keep the group plan after a qualifying event — at their own expense, up to 102% of the plan's cost, for 18 months after a termination or cut in hours and 36 months after most other events.
Federal COBRA applies once the employer normally employed 20 or more employees on a typical business day in the year before — the DOL's test is more than half of the typical business days, with part-timers counted as fractions. Below that, the federal rule does not apply at all.
The notices, once COBRA applies
Coverage starts
The plan's general notice to a new participant and spouse, within the first 90 days of coverage
Qualifying event
Termination, reduced hours, death, divorce or legal separation, a child aging out
Within 30 days
The employer tells the plan administrator of a termination, reduced hours or death within 30 days
Then 14 days
The plan sends the election notice within 14 days of hearing
60-day election
Each qualified beneficiary has at least 60 days to elect
First premium
At least 45 days after electing to make the first payment
Step 1: Recognize the event
Termination for any reason other than gross misconduct is a qualifying event; so is a cut in hours that ends eligibility.
Step 2: Notify the plan
Tell the plan administrator — often the carrier or a COBRA vendor — within 30 days.
Step 3: Election notice goes out
The administrator sends the election notice within 14 days.
Step 4: Bill the premium
Up to 102% of the full cost — the employer's former share included, unless it chooses to help.
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Background reading explains; it is never the authority for a rule. Anything marked as a convention is ours, not the rule-maker's.
- Federal statute
- ERISA §601, 29 U.S.C. §1161 (opens in a new tab)COBRA continuation coverage, and the small-employer exceptionFree to read
- Federal agency guidance
- DOL EBSA — An Employer's Guide to Group Health Continuation Coverage Under COBRA (opens in a new tab)COBRA for employers: who is covered, the notices and their deadlines, the 102% premiumFree to read
- State authority
- California Department of Insurance — Health FAQs, Cal-COBRA (opens in a new tab)Cal-COBRA: California's continuation coverage for employers with 2 to 19 employeesFree to read
- Background reading — not an authority
The words this lesson teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.
- COBRA continuation coverageThe federal right of an employee and family who lose group health coverage through a qualifying event to keep it, at up to 102% of its cost, for 18 months (termination or reduced hours) or 36 (most other events). Applies once the employer had 20 or more employees on more than half its business days the year before
- Qualifying eventThe event that makes COBRA continuation available — for an employee, termination for any reason other than gross misconduct, or a reduction in hours; for a spouse or child, also divorce or legal separation, the employee's death, and a child's loss of dependent status. The employer has 30 days to tell the plan of a termination or reduced hours
- State continuation coverageA state's own continuation right for insured plans, usually reaching employers too small for federal COBRA — California's Cal-COBRA covers employers with 2 to 19 employees, for up to 36 months
- Group health planA health plan an employer maintains for its employees — insured or self-insured. Subject to ERISA for a private employer, and to COBRA once the employer has 20 or more employees