COBRA can feel like an alphabet-soup acronym until you understand why it exists and how it works. The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that requires certain employers to offer continued health coverage to employees and their dependents after qualifying events such as job loss, reduced hours, or other major life changes. For many workers, COBRA serves as a vital safety net—allowing them to stay on their employer’s health plan during periods of transition when maintaining coverage matters most.What Plans Must Offer COBRA?

COBRA applies to:
– Private-sector employers with 20 or more employees on more than 50% of their typical business days in the previous calendar year
– Group health plans sponsored by state and local governments

One major advantage of fully insured plans is that carriers handle COBRA administration, removing compliance burdens from employers. Click here to learn more

Exempt from COBRA:
– Federal government health plans
– Church-related or religious organization plans
– Employers with fewer than 20 employees (though some states have ‘mini-COBRA’ laws for small employers)

Which Employers Are Required to Offer COBRA?

Any employer with 20+ employees that sponsors a group health plan must comply. Both full-time and part-time employees count toward the 20-employee threshold (with part-time employees counted as a fraction of a full-time equivalent).

When Is COBRA Applicable?

COBRA continuation coverage must be offered when a qualifying event causes an employee (or dependent) to lose health coverage. Qualifying events include:
– Termination of employment (voluntary or involuntary) for reasons other than gross misconduct
– Reduction in hours
– Death of the covered employee
– Divorce or legal separation
– Dependent child aging out of eligibility

What If the Employee Quits?

Employees who voluntarily resign are still entitled to COBRA coverage as long as the termination was not for gross misconduct.

What If the Employee Was Terminated for Gross Misconduct?

If an employee is terminated for gross misconduct, the employer is not required to offer COBRA coverage. The term is not precisely defined, but generally means willful, intentional, and serious behavior (theft, violence, fraud). Employers should seek legal counsel before denying COBRA on this basis.

How Long Is COBRA Coverage Offered?

– 18 months for job loss or reduction in hours
– 29 months if the individual is disabled (SSA determination within 60 days of COBRA coverage)
– 36 months for dependents due to death, divorce, or loss of dependent status

Who Sends the COBRA Notice?

Employers and plan administrators are responsible. Two key notices apply:
1. General Notice: Sent to employees and spouses when they first join the plan, explaining COBRA rights
2. Election Notice: Sent after a qualifying event occurs, explaining election deadlines and cost

What Is the Compliance Timeline?

– Employer must notify plan administrator within 30 days of qualifying event
– Plan administrator must send COBRA election notice within 14 days of notification
– Employees/dependents have 60 days from the later of notice date or coverage loss date to elect COBRA
– Premium payments are retroactive to coverage loss if elected within the deadline

Sample COBRA Election Notice (14-Day Notice)

[Employer/Plan Administrator Letterhead]

Date: [Insert Date]

To: [Employee/Dependent Name]
Address: [Insert Address]

Dear [Employee/Dependent Name],

This notice is to inform you that you have the right to continue your group health coverage under the [Employer/Plan Name] in accordance with COBRA.

Qualifying Event: [Termination / Reduction in hours / Other]
Date of Coverage Loss: [Insert Date]

You may elect to continue coverage for up to [18/29/36 months depending on event] by paying the full premium plus up to 2% administrative fee.

Your Rights:
– You have 60 days from the date of this notice or coverage loss (whichever is later) to elect COBRA
– If not elected, coverage ends permanently
– If elected, coverage is retroactive to the date coverage ended

Cost of Coverage: $[Insert Amount] monthly

To elect COBRA, complete the enclosed election form and return to [Plan Administrator Contact] by [Deadline].

Questions: Contact [Plan Administrator Contact Info]

Sincerely,
[Plan Administrator/Employer Representative]

Important Legal Disclosure

This sample COBRA notice is for educational purposes only and may not satisfy all legal requirements. Employers should consult legal counsel or a compliance professional before issuing COBRA notices.

Key Takeaway

COBRA ensures employees and dependents can maintain health coverage after job changes, but employers must follow strict rules to stay compliant. Whether an employee quits, is terminated, or loses coverage due to other life events, COBRA provides a structured safety net — except in cases of gross misconduct.

Employers seeking simplified compliance often choose fully insured plans because the carrier manages COBRA administration, RxDC reporting, and ACA requirements. Learn more about our Fully Insured Health Plan options

Talk to Memberly

Memberly helps employers stay compliant with COBRA by coordinating with TPAs, ensuring timely notices, and guiding plan sponsors on obligations and communications.

Contact: Dom Maggiore

Phone: (631) 905-6555

Email: dom.maggiore@memberlybenefits.com