COBRA is the federal law that keeps your employer health insurance in place after you've stopped being an employee, as long as you can cover the premiums yourself. The law was signed in 1985, but its mechanics still catch employers off guard. Missed notice deadlines trigger penalties of $100 per day per affected beneficiary (up to $200 per family per day) under IRS rules, plus additional ERISA exposure. Incorrect election periods give laid-off employees the right to retroactive coverage after an expensive medical event. For employers with 20 or more workers, running a compliant COBRA program isn't optional, and the administrative load has pushed most mid-sized employers toward third-party COBRA administrators.
What Qualifies an Employee for COBRA Coverage COBRA applies only after a qualifying event. The most common ones: termination (other than for gross misconduct), reduction in hours below the eligibility threshold, divorce or legal separation from the covered employee, death of the covered employee, and a dependent child aging out of the plan. Each qualifying event carries a different maximum coverage length and its own notice rules.
Only group health plans are covered. COBRA doesn't apply to retirement, life insurance, or disability plans, though some states have mini-COBRA laws that extend continuation rights to smaller employers and to benefits beyond health coverage.
How Long COBRA Coverage Lasts Standard COBRA coverage runs 18 months for terminations and hour reductions, 36 months for divorce, death, or a dependent aging out. Coverage can be extended to 29 months if the qualified beneficiary is determined to be disabled by the SSA within 60 days of the qualifying event. If a second qualifying event happens during the initial 18-month period, coverage can be extended to 36 months total.
Can COBRA Coverage Be Extended Beyond the Federal Limit? Some states have expanded continuation rights beyond federal COBRA. California, New York, and Illinois are among the states where mini-COBRA or Cal-COBRA rules provide longer continuation for certain events or lower-threshold employers. Check the state where the employee lives and the state where the employer is headquartered.
The COBRA Notice and Election Timeline Three notices matter. The initial (general) notice has to go out within 90 days of the employee first becoming covered. The qualifying event notice has to go out from the employer to the plan administrator within 30 days of the event. The election notice has to go from the plan administrator to the qualified beneficiary within 14 days after the plan administrator is notified. The beneficiary then has 60 days to elect coverage and 45 days after election to pay the first premium. Miss any of these and you're looking at excise taxes and ERISA penalties.
Building a COBRA Administration Process That Avoids Penalties Four practices. First, automate notice generation in the HRIS so nothing relies on a manager remembering. Second, track qualifying events in real time since delayed reporting is the most common source of penalty exposure. Third, audit your COBRA administrator quarterly if you use one; their mistakes become your liability. Fourth, integrate COBRA administration with your payroll and onboarding systems so qualifying events flow through automatically.
For current COBRA rules and model notices, the Department of Labor maintains an employer guide at dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra , and the IRS publishes excise tax rules for COBRA violations in Publication 15-B, available at irs.gov/publications/p15b . Consumer-facing COBRA information is at healthcare.gov/unemployed/cobra-coverage .
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