COBRA Basics
COBRA requires employers with 20 or more employees to offer continued health coverage after qualifying events such as termination or reduction in hours. Coverage must mirror the active plan and last up to 18 or 36 months depending on the event.
Compliance Essentials
- Timely notices: Provide the general notice within 90 days of plan enrollment and send election notices within 14 days of notification from the plan administrator.
- Accurate premiums: Calculate 102% of the total cost of coverage, including both employer and employee portions plus the allowed administrative load.
- Record keeping: Track every notice and election date to defend against DOL audits or participant disputes.
Best Practices for 2026
- Automate qualifying event tracking with your HRIS.
- Coordinate with payroll to ensure COBRA premiums are applied correctly each month.
- Train HR staff on handling second qualifying events and disability extensions.
By mastering COBRA operations, employers protect employees during transitions and avoid costly penalties. Pair COBRA with a Section 125 plan for active employees and contact us for benefits support.
Frequently Asked Questions
What is COBRA health insurance?
COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that allows employees and their dependents to continue their employer-sponsored health insurance after a qualifying event such as job loss, reduction in hours, or divorce. COBRA coverage mirrors the same plan the employee had while actively employed. The employee pays the full premium, including the portion the employer previously covered, plus a 2% administrative fee.
How long does COBRA coverage last?
COBRA coverage lasts up to 18 months for qualifying events such as voluntary or involuntary job loss and reduction in work hours. Coverage can extend to 36 months for qualifying events such as divorce, legal separation, or a dependent child aging out of the plan. Employees who become disabled within the first 60 days of COBRA coverage may qualify for an 11-month disability extension, bringing the total to 29 months.
How much does COBRA insurance cost per month?
COBRA insurance costs 102% of the total plan premium, which includes both the employer and employee portions plus a 2% administrative fee. For a family plan with a total monthly premium of $1,800, the COBRA cost would be $1,836 per month. COBRA premiums are often significantly higher than what the employee paid while employed because the employer is no longer contributing its share.
What employers are required to offer COBRA?
COBRA applies to private-sector employers with 20 or more employees who sponsor a group health plan. State and local government employers are also covered. Federal employees are covered under a similar program. Employers with fewer than 20 employees are not subject to federal COBRA, but many states have "mini-COBRA" laws that extend continuation coverage rights to employees of smaller businesses.
What is a COBRA qualifying event?
A COBRA qualifying event is a specific life change that causes an employee or dependent to lose group health coverage. Common qualifying events include voluntary or involuntary termination (other than for gross misconduct), reduction in work hours, employee death, divorce or legal separation, and a dependent child aging out of eligibility. Employers must notify the plan administrator within 30 days of learning about a qualifying event.
What are the COBRA notice requirements for employers?
Employers must provide a general COBRA notice within 90 days of an employee's enrollment in the group health plan. After a qualifying event, the plan administrator must send a COBRA election notice within 14 days of receiving notification. The election notice must explain coverage options, premium costs, and the 60-day election window. Failure to provide timely notices can result in penalties from the Department of Labor.
Can you be on COBRA and get marketplace insurance at the same time?
An individual can enroll in a Marketplace plan instead of COBRA, but carrying both simultaneously is generally not practical or cost-effective. Losing employer-sponsored coverage is a qualifying life event that triggers a Special Enrollment Period on the Healthcare Marketplace. Marketplace plans may offer lower premiums than COBRA, especially for individuals who qualify for premium tax credits based on income.
What happens if an employer does not offer COBRA?
Employers with 20 or more employees that fail to offer COBRA coverage face penalties under ERISA and the Internal Revenue Code. The Department of Labor can impose penalties of up to $110 per day for each affected individual during the period of noncompliance. Affected employees may also file lawsuits to recover benefits, obtain court orders for coverage, and seek attorney's fees. Proper COBRA administration and timely notice delivery are essential to avoid these penalties.