COBRA Insurance

What Is COBRA Insurance?

COBRA, the Consolidated Omnibus Budget Reconciliation Act, is a federal law that lets employees and their dependents temporarily keep their employer's group health coverage after certain qualifying events, like job loss or a reduction in hours. It applies to private-sector group health plans sponsored by employers with 20 or more employees.

COBRA administration typically becomes relevant the moment offboarding begins, since the clock on required notices starts running from the date coverage would otherwise end.

How Does COBRA Work?

When a qualifying event occurs, the plan administrator has 14 days to send a COBRA election notice after being notified of the event. The employee or dependent then has 60 days to elect continuation coverage, and 45 more days to make the first premium payment.

Missing any of these windows can forfeit COBRA rights entirely, which is why COBRA notices belong on every offboarding checklist rather than being handled as an afterthought.

Who Qualifies for COBRA, and for How Long?

Coverage length depends on the type of qualifying event that triggered eligibility.

According to SHRM, only employees and dependents who meet the legal definition of a qualified beneficiary must be offered continuation coverage, which is why correctly identifying qualifying events matters as much as sending the notice itself.

How Much Does COBRA Cost?

COBRA is rarely cheap, because the employer's premium subsidy disappears the moment someone elects it. Forbes notes that qualified individuals pay the full premium themselves, including the share their employer used to cover, plus up to a 2% administrative fee.

This cost jump is one of the most important things for departing employees to understand clearly. Indeed lists COBRA among the standard terms employees should know from their benefits package, precisely because the transition from subsidized to full-cost coverage often catches people off guard.

What Should Employers Do to Stay Compliant?

Consistent, well-documented offboarding is the foundation of COBRA compliance. Structuring COBRA notice delivery inside broader HR compliance processes, rather than as a manual side task, reduces the risk of missed deadlines that can trigger IRS excise taxes.

Because COBRA administration touches payroll, benefits, and legal notice timelines all at once, following documented offboarding best practices helps ensure nothing slips through the cracks during a departure, voluntary or not.

Employers managing frequent departures, whether from turnover or seasonal staffing changes, often outsource COBRA notice tracking through a PEO or dedicated third-party administrator to keep pace with the volume.

The stakes around continuity of coverage matter more as healthcare costs rise generally. The World Economic Forum has noted that health spending now consumes roughly 10% of global GDP, underscoring why a gap in coverage, even temporary, carries real financial risk for departing employees.

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Frequently Asked Questions

Q: How long do I have to elect COBRA coverage?

A: You generally have 60 days from the later of your coverage end date or the date your COBRA election notice is provided.

Q: Does COBRA cost the same as my employer-sponsored plan?

A: No. You pay the full premium yourself, including the portion your employer previously covered, plus up to a 2% administrative fee.

Q: What companies are required to offer COBRA?

A: COBRA generally applies to private-sector group health plans sponsored by employers with 20 or more employees in the prior year.

Q: How long does COBRA coverage last?

A: Typically 18 months for job loss or reduced hours, extending up to 36 months for events like divorce, death, or Medicare entitlement of the covered employee.

Q: What happens if an employer misses a COBRA notice deadline?

A: Employers can face IRS excise taxes and potential litigation for failing to provide timely, accurate COBRA notices.