FAQs on COBRA Continuation Health Coverage for Employers and Advisers

The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires certain employers and unions to offer temporary continuation of group health coverage to employees and their families who lose health benefits due to specific qualifying events.  

COBRA applies to private-sector group health plans offered by employers with at least 20 employees working on more than 50 percent of business days in the previous calendar year.

It also applies to state and local government plans but does not apply to federal government plans or churches and certain church-related organizations.

Yes, part-time employees are counted to determine if the plan is subject to COBRA. However, they count as a fraction of a full-time employee, based on hours worked. For example, if a company defines 40 hours per week as full-time:

• A part-time employee working 20 hours per week counts as 0.5 of a full-time employee.
• A part-time employee working 16 hours per week counts as 0.4 of a full-time employee.

COBRA coverage is available to qualified beneficiaries who lose group health coverage due to a qualifying event.

Qualified Beneficiaries are individuals covered by a group health plan the day before a qualifying event, including:

• The covered employee.
• The covered employee’s spouse or former spouse.
• The covered employee’s dependent children.

 In certain cases, other individuals may be considered qualified beneficiaries, including:

• Retired employees, their spouse or former spouses, and dependent children if the employer sponsoring their group health plan declares bankruptcy.
• Any child born to or placed for adoption with a covered employee during the COBRA coverage period.
• Employer’s agents, independent contractors, and directors who were covered under the employer’s group health plan.

Qualifying Events are certain events that cause an individual to lose health coverage under a group health plan. The type of qualifying event will determine who the qualified beneficiaries are and how long they will be entitled to COBRA coverage.

Qualifying events for the covered employee include:

• Job loss (except for gross misconduct).
• Reduction in work hours.

Qualifying events for the covered employee’s spouse and dependents include:

• Termination of the covered employee's employment for any reason other than gross misconduct.
• Reduction in the covered employee’s work hours.
• Divorce or legal separation from the covered employee.
• Death of the covered employee.
• Loss of dependent child status.
• In limited situations, the covered employee becomes eligible for Medicare.

Continuation coverage must match the coverage offered to active employees not receiving COBRA. Qualified beneficiaries must have the same rights and opportunities as other active plan participants, including:

Access to open enrollment.

The same co-pays, deductibles, and coverage limits.

The same process for filing claims and appealing denied claims.

Any changes to the health plan for active employees also apply to COBRA participants. If a child is born to or placed for adoption with a covered employee during COBRA coverage, the plan must allow the child to be added to the coverage as a qualified beneficiary.

Qualified beneficiaries are responsible for their COBRA premiums. However, employers may choose to cover part or all of the cost. A third party may also pay the premiums on behalf of the qualified beneficiary.

The maximum amount a group health plan can charge is:

102 percent of the total premium.

150 percent of the total premium when a disabled qualified beneficiary receives COBRA coverage under a disability extension.

Yes, COBRA premiums can increase if the cost of the plan rises. However, plans typically lock in monthly premiums at the beginning of each 12-month billing cycle.

Group health plans must follow specific guidelines when collecting COBRA premiums:

Initial payment: Qualified beneficiaries do not need to make a payment when electing COBRA. They have at least 45 days after election to pay the initial premium.

Ongoing payments: Plans must offer monthly payment installments to qualified beneficiaries but are permitted to allow alternative schedules such as weekly or quarterly payments.

Grace period: Plans must establish clear due dates for each payment and provide a minimum 30-day grace period for payments due after the initial payment has been made. If payment is not made within the grace period, coverage can be cancelled.

Plans do not have to send monthly premium notices. Beneficiaries are responsible for keeping track of their payment due dates.

Yes, COBRA coverage can be terminated if:

• A qualified beneficiary fails to pay the initial premium within 45 days of electing COBRA.
• Full payment is not received before the grace period ends.

If a payment is less than the required amount but not significantly less, the plan may notify the qualified beneficiary of the shortage and allow a reasonable period (usually at least 30 days) to pay the difference.⁽¹⁾

Plans must provide notice of early termination if they cancel coverage because the premium was not paid in full.

The U.S. Department of Labor (DOL) provides two COBRA model notices to help employers and group health plans comply with notification requirements:

• General Notice: Given when health coverage begins, explaining COBRA rights and how it works.
• Election Notice: Sent when an individual becomes eligible for COBRA coverage, explaining how to enroll and deadlines for doing so.

DOL provides COBRA model notices in a modifiable and electronic format. You can download them here:

• Model COBRA General Notice
• Model COBRA Election Notice

Plan administrators must complete these notices with the necessary details before distributing them. Using DOL’s model notices, when properly completed, ensures compliance with COBRA notification requirements.⁽²⁾

DOL provides model notices to assist group health plans in complying with COBRA’s legal requirements and to ensure that individuals receive clear and accurate information about their COBRA rights.

Multiple federal agencies, including the Departments of Labor, Treasury, Health and Human Services, and the Internal Revenue Service, regulate COBRA.

The Departments of Labor and Treasury handle COBRA for private-sector group health plans, while the Department of Health and Human Services oversees it for state and local government health plans.

For detailed information about COBRA, review “An Employer's Guide to Group Health Continuation Coverage Under COBRA.”

For additional questions:

• Private-sector and union health plans can contact the Employee Benefits Security Administration at askebsa.dol.gov or call (866) 444-3272.
• State and local government health plans can email the Centers for Medicare & Medicaid Services at phig@cms.hhs.gov or call (877) 267-2323, ext. 6-1565.