COBRA Continuation Coverage: Employer and Employee Guide
COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that gives employees and their covered dependents the right to continue employer-sponsored group health coverage for a limited time after leaving the employer's plan. Federal COBRA applies to employers with 20 or more employees in the prior calendar year. Cal-COBRA (California's version) applies to employers with 2–19 employees — providing similar rights under state law.
COBRA qualifying events for employees: voluntary or involuntary job loss (except for gross misconduct), reduction in hours below eligibility threshold. Duration: 18 months. Qualifying events for dependents: death of covered employee, divorce or legal separation from covered employee, dependent child aging out of eligibility (26th birthday), employee becoming eligible for Medicare. Duration: 36 months.
Employer COBRA Obligations
When a qualifying event occurs: the employer must notify the plan administrator within 30 days. The plan administrator (often the carrier or a COBRA administrator) must send the COBRA election notice to the qualified beneficiary within 14 days. The qualified beneficiary has 60 days to elect COBRA and 45 days after election to pay the first premium. Failure to provide timely COBRA notices exposes employers to significant liability — $110/day per qualified beneficiary for late notices.
COBRA Cost: The Main Deterrent
COBRA is expensive because the former employee pays 100% of the group premium plus up to 2% administrative fee. An employee who paid $200/month in employee contributions might pay $750–$900/month for COBRA (covering the employer's former $550–$700 contribution). For many former employees, this makes COBRA unaffordable. Alternative: Covered California ACA marketplace plans may be cheaper, especially for individuals with income qualifying for premium subsidies (under 400% FPL).
Cal-COBRA for Small California Employers
Cal-COBRA covers employers with 2–19 employees — smaller than federal COBRA's 20-employee threshold. Cal-COBRA provides 36 months of continuation coverage (vs. federal COBRA's 18 months for most events). Cal-COBRA administration is managed through the insurance carrier (unlike federal COBRA, which is employer-administered). Employers with 2–19 employees should inform terminating employees of their Cal-COBRA rights and direct them to the carrier for enrollment paperwork.