The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that allows workers and their families to temporarily continue employer-sponsored group health coverage when a “qualifying event” causes a loss of coverage. COBRA applies to most private-sector health plans maintained by employers with 20 or more employees. California residents also benefit from a state-level law, Cal-COBRA, which extends these rights and applies to a broader range of employers, ensuring more people have access to continued health insurance.
Determining Eligibility and Qualifying Events
Federal COBRA coverage is available to employees, spouses, and dependent children who were enrolled in the employer’s health plan the day before a qualifying event. The employer must have 20 or more employees to be subject to the federal law. A qualifying event is the trigger that causes the loss of coverage and allows for COBRA election.
Common qualifying events include voluntary or involuntary termination of employment (unless for gross misconduct), or a reduction in the employee’s hours leading to a loss of eligibility. Family-related events also qualify, such as the death of the covered employee, divorce, legal separation, or a dependent child ceasing to meet the plan’s dependency requirements (e.g., turning age 26). For job loss or reduced hours, the maximum federal continuation period is typically 18 months.
The responsibility for notifying the plan administrator about the qualifying event is split between the employer and the beneficiary. The employer must notify the administrator within 30 days of events like termination, reduction in hours, death, or Medicare entitlement. Conversely, the beneficiary must notify the plan administrator within 60 days of a divorce, legal separation, or a child losing dependent status. Failure to provide timely notice of these beneficiary-driven events can result in the loss of COBRA rights.
Initiating and Electing Coverage
The process begins once the plan administrator receives notice of the qualifying event, after which they have 14 days to send an Election Notice to all qualified beneficiaries. This notice contains the necessary forms and detailed information about the coverage, cost, and deadlines. The Election Notice initiates the election period, which is the window of time a beneficiary has to formally accept the continuation coverage.
The election period must last for at least 60 days, starting from the later of the date the notice is provided or the date coverage was lost. This 60-day period is the time limit for the beneficiary to complete and return the election form. Each qualified beneficiary, including the former employee, spouse, and dependent children, has an independent right to elect coverage.
The election form must be submitted before the 60-day deadline expires, as missing this window generally means forfeiting all COBRA rights. If the form is returned on time, the coverage is retroactive to the date coverage was lost due to the qualifying event. A beneficiary who initially waives COBRA can revoke that waiver and elect coverage later, provided the full 60-day election period has not yet ended.
Cal-COBRA: Extended Coverage in California
California has its own law, the California Continuation Benefits Replacement Act (Cal-COBRA), which enhances the rights provided under federal law. Cal-COBRA ensures that employees of smaller companies (those with 2 to 19 eligible employees) have access to continuation coverage, since federal COBRA only applies to employers with 20 or more employees. For these smaller employers, the coverage provided is up to 36 months total from the date of the qualifying event.
Cal-COBRA also serves as an extension for individuals who have exhausted their federal COBRA coverage, which typically runs for 18 or 29 months. If a beneficiary is entitled to less than 36 months of coverage under federal law, Cal-COBRA allows continuation until a total of 36 months from the initial qualifying event is reached. This extension is activated when the beneficiary receives an exhaustion notice from the plan administrator, which includes a new election opportunity for the state continuation coverage.
The application for the Cal-COBRA extension is a separate process from the initial federal election and must be completed promptly after federal benefits are exhausted. Once elected, the beneficiary remains in the same group health plan offered by the employer. The premium for Cal-COBRA continuation coverage can be up to 110% of the applicable group rate.
Premium Payments and Grace Periods
Once a beneficiary elects COBRA, they are responsible for the full cost of the premium, which can be up to 102% of the plan’s total cost for a similarly situated active employee. This total cost includes the portion the employee previously paid and the amount the employer contributed, plus a 2% administrative fee. The plan cannot demand payment simultaneously with the election form.
The initial premium payment is due within 45 days after the date the beneficiary elects continuation coverage. This deadline is firm, and there is no grace period for this first payment. If the initial payment is made within the 45-day window, coverage is retroactively reinstated from the date the loss of coverage occurred, ensuring no gap in health insurance.
Subsequent monthly premiums are due on the date set by the plan, but the plan must provide a minimum 30-day grace period for each payment. If a payment is made late but still within the 30-day grace period, coverage may be suspended and then retroactively reinstated once the payment is received. Failure to pay any premium before the end of its grace period is grounds for immediate termination of all continuation coverage rights.