COBRA is the federal law that gives workers and their families the right to continue the group health coverage they had through an employer for a limited period after certain events. It generally applies to private-sector group health plans of employers with 20 or more employees in the prior year. It does not cover plans sponsored by the federal government or by churches and certain church-related organizations.
For employees, the qualifying events are losing a job for any reason other than gross misconduct, and a reduction in hours. Spouses and dependents have other qualifying events, such as death of the employee or divorce.
The timeline
- The employer notifies the plan within 30 days of a termination or reduction in hours.
- The plan sends an election notice within 14 days of receiving that notice.
- Each qualified beneficiary has at least 60 days to elect coverage.
- Coverage generally lasts up to 18 months after a termination or reduction in hours, and up to 36 months for certain other events.
The plan may charge up to 102% of the cost of coverage. Many states have similar "mini-COBRA" laws for insured plans that may reach employers with fewer than 20 employees.
Example
Alex is laid off from a 40-person company with a group health plan (illustrative). HR notifies the plan administrator, often an outside COBRA administrator, within 30 days, and Alex receives an election notice explaining the options.
Common pitfalls
- Offboarding checklists without a COBRA step.
- Nobody sure who the plan administrator is.
- Small employers forgetting state continuation laws.
This is a general summary, not legal advice. Check the Department of Labor sources below.