# 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.

Source: https://lopifi.com/learn/cobra-for-small-employers
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**Does COBRA apply to small employers?** 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](https://lopifi.com/md/glossary/cobra-continuation-coverage) gives an employee and their family the right to keep the group plan after a [qualifying event](https://lopifi.com/md/glossary/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.

> “at least 20 employees on more than 50 percent of their typical business days”

— [DOL EBSA — An Employer's Guide to Group Health Continuation Coverage Under COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra), COBRA for employers: who is covered, the notices and their deadlines, the 102% premium

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.

> “Subsection (a) shall not apply to any group health plan for any calendar year if all employers maintaining such plan normally employed fewer than 20 employees on a typical business day during the preceding calendar year.”

— [ERISA §601, 29 U.S.C. §1161](https://www.law.cornell.edu/uscode/text/29/1161), COBRA continuation coverage, and the small-employer exception

**Northwind — Too small for COBRA, not for the state.** With two employees, Northwind is far below 20: federal COBRA does not reach its plan. That is not the end of it. Many states have [state continuation coverage](https://lopifi.com/md/glossary/state-continuation-coverage) for insured plans of small employers — California's Cal-COBRA covers employers with 2 to 19 employees, for up to 36 months. Ask the broker or carrier which state's law applies to the policy.

> “the group policy must be in force with 2-19 employees covered on at least 50 percent of its working days”

— [California Department of Insurance — Health FAQs, Cal-COBRA](https://www.insurance.ca.gov/01-consumers/110-health/frequently-asked-questions.cfm), Cal-COBRA: California's continuation coverage for employers with 2 to 19 employees

## 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

From the day coverage starts to the first COBRA premium. Days are the DOL's minimums and maximums.

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.
2. **Notify the plan.** Tell the plan administrator — often the carrier or a COBRA vendor — within 30 days.
3. **Election notice goes out.** The administrator sends the election notice within 14 days.
4. **Bill the premium.** Up to 102% of the full cost — the employer's former share included, unless it chooses to help.

When an employee leaves a COBRA-covered plan.

> **Disability.** If the Social Security Administration determines a qualified beneficiary was disabled before the 60th day of continuation coverage, the family's 18 months can extend by 11, to 29 — and the plan may charge up to 150% during the extension.

## Where this lesson's rules come from

- [DOL EBSA — An Employer's Guide to Group Health Continuation Coverage Under COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra) — COBRA for employers: who is covered, the notices and their deadlines, the 102% premium (agency)
- [ERISA §601, 29 U.S.C. §1161](https://www.law.cornell.edu/uscode/text/29/1161) — COBRA continuation coverage, and the small-employer exception (statute)
- [California Department of Insurance — Health FAQs, Cal-COBRA](https://www.insurance.ca.gov/01-consumers/110-health/frequently-asked-questions.cfm) — Cal-COBRA: California's continuation coverage for employers with 2 to 19 employees (state)
- [Wikipedia, “Consolidated Omnibus Budget Reconciliation Act of 1985”](https://en.wikipedia.org/wiki/Consolidated_Omnibus_Budget_Reconciliation_Act_of_1985) — COBRA (reference)

- **Track:** [Health & benefits](https://lopifi.com/md/learn/benefits)
- **Lesson:** Lesson 6 of 10 — 9 min
- **Terms taught:** [COBRA continuation coverage](https://lopifi.com/md/glossary/cobra-continuation-coverage), [Qualifying event](https://lopifi.com/md/glossary/qualifying-event), [State continuation coverage](https://lopifi.com/md/glossary/state-continuation-coverage), [Group health plan](https://lopifi.com/md/glossary/group-health-plan)
- **Previous:** [ICHRA, Benefits · Lesson 5](https://lopifi.com/md/learn/qsehra-vs-ichra/ichra-explained)
- **Next:** [ERISA: plan document, SPD and Form 5500, Benefits · Lesson 7](https://lopifi.com/md/learn/erisa-plan-document-spd-form-5500)
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