COBRA Continuation Coverage

COBRA continuation coverage is the right of a qualified beneficiary to keep the group health coverage they had, at the group rate, for a limited period after a qualifying event that would otherwise end that coverage.

It applies to group health plans, which includes medical, dental, vision, health flexible spending accounts, and health reimbursement arrangements. It does not extend life insurance or disability coverage. The coverage continued is the same coverage the person had the day before the qualifying event, and it changes when the plan changes for active employees.

Who qualifies and what it costs

A qualified beneficiary is an individual covered by the group health plan on the day before the qualifying event: the employee, the employee's spouse, and dependent children. A child born to or adopted by the covered employee during the continuation period is also a qualified beneficiary.

Each qualified beneficiary has an independent election right. A spouse can elect COBRA even if the employee declines, and can elect different coverage tiers where the plan allows. Treating the family as a single decision is a common and consequential error.

The plan may charge up to 102 percent of the full cost of coverage, meaning the total premium including the portion the employer used to pay, plus a 2 percent administrative charge. During the 11-month disability extension the charge may rise to 150 percent of the full cost. That jump from an employee-only payroll deduction to the full group rate is why many people decline COBRA, and why individual marketplace coverage should be mentioned as an alternative rather than left for the person to discover.

Qualifying events and maximum coverage periods

The maximum period runs from the date coverage would otherwise be lost.

The notice and election sequence

Each step has its own clock, and the clocks start on different dates.

1. 1Provide the general notice of COBRA rights to the covered employee and spouse within 90 days after group health coverage begins. This is a new hire step, not a separation step, and it is the one most often skipped.
2. 2When a qualifying event occurs that the employer knows about, such as a termination, a reduction in hours, death, or Medicare entitlement, notify the plan administrator within 30 days.
3. 3For events only the family would know about, such as divorce, legal separation, or a child losing dependent status, the qualified beneficiary must notify the plan, generally within 60 days. The plan's procedures for that notification have to be described in the plan documents.
4. 4The plan administrator sends the election notice within 14 days of being notified of the qualifying event. Where the employer is also the plan administrator, the combined window is 44 days from the qualifying event or the loss of coverage.
5. 5Each qualified beneficiary has 60 days, measured from the later of the date coverage is lost or the date the election notice is provided, to elect continuation coverage.
6. 6The initial premium is due within 45 days after the election, and it covers the period retroactive to the date coverage was lost, so there is no gap for someone who elects late in the window.
7. 7Subsequent premiums are due monthly with a minimum 30-day grace period. Coverage may be terminated for nonpayment after the grace period expires.
8. 8Send a notice of unavailability when someone who requests continuation is not entitled to it, and a notice of early termination when coverage ends before the maximum period.
9. 9Retain proof of what was sent, to whom, at what address, and on what date. Where a notice failure is alleged, the record of the mailing is usually the whole case.

Where COBRA administration breaks

• Missing the general notice at hire. It is unconnected to any separation, so it falls outside the offboarding checklist and is easy to omit for years without noticing.
• Sending the election notice to the employee only. The spouse has an independent right and, where the plan knows of a spouse at a different address, a separate delivery may be required.
• A stale address of record. Notices are judged on whether they were sent in a manner reasonably calculated to reach the person, so an unverified last known address is a weak position.
• Reduction in hours not recognized as a qualifying event. Moving an employee from full time to part time can end plan eligibility and trigger COBRA even though nobody left.
• Employer-subsidized COBRA in a severance agreement handled informally, without documenting how the subsidy interacts with the election, the payment deadlines, and the end of the subsidy period.
• Terminating coverage retroactively without processing the COBRA event, which leaves claims incurred in the gap unresolved and the qualified beneficiary without notice.
• Health flexible spending accounts overlooked. They are group health plans and can carry a limited continuation obligation of their own.
• No tracking of the interaction with Medicare, which can end continuation coverage early in specific circumstances and is frequently misunderstood in both directions.

Why it matters operationally

COBRA is where offboarding, benefits, and payroll have to agree. The termination date in the HR system drives the coverage end date, which drives the qualifying event date, which starts every notice clock. If those dates are entered inconsistently across systems, the notices go out on the wrong schedule and the error is not visible until someone files a claim or a complaint.

Because the exposure is procedural, the controls are procedural: a single authoritative separation date, an automated trigger from that date to the notice, delivery records retained for each notice, and a periodic check that the general notice is actually going out at hire.