COBRA Guide for Employers: Requirements, Costs & Timelines
Last updated: 2026-03-27
Summary:COBRA (Consolidated Omnibus Budget Reconciliation Act) requires employers with 20+ employees to offer continuation of group health coverage for 18-36 months after qualifying events like termination, hours reduction, divorce, or death. The former employee pays up to 102% of the full premium (employer + employee share + 2% admin fee). About 40 states have "mini-COBRA" laws covering smaller employers. Employers must provide timely notices within strict deadlines or face penalties of $100-$200 per day per beneficiary. COBRA applies to medical, dental, and vision plans.
What is COBRA?
COBRA is a federal law that gives employees and their families the right to continue their employer-sponsored group health insurance for a limited period after certain qualifying events that would otherwise cause them to lose coverage. It was enacted in 1985 as part of the Consolidated Omnibus Budget Reconciliation Act.
COBRA does not require employers to pay for the continued coverage — it only requires them to allow the former employee to remain on the group plan at their own expense. The employer can charge up to 102% of the total premium cost (the full amount, including what the employer was previously paying, plus a 2% administrative fee).
COBRA coverage is the same plan, with the same benefits, network, and coverage terms that the employee had while actively employed. The employee cannot be required to provide evidence of insurability or satisfy new waiting periods.
Which employers does COBRA apply to?
Federal COBRA applies to:
- •Private-sector employers with 20 or more employees on more than 50% of typical business days in the prior calendar year
- •State and local government employers (covered under parallel provisions of the Public Health Service Act)
Federal COBRA does NOT apply to:
- •Employers with fewer than 20 employees (check mini-COBRA below)
- •The federal government (federal employees have separate continuation rights under FEHB)
- •Churches and certain church-related organizations
The 20-employee count includes both full-time and part-time employees. Part-time employees are counted as a fraction of full-time (e.g., a half-time employee counts as 0.5).
What are the COBRA qualifying events?
| Qualifying Event | Who Gets COBRA | Max Duration | Notes |
|---|---|---|---|
| Voluntary or involuntary termination (not gross misconduct) | Employee + dependents | 18 months | Most common triggering event |
| Reduction in hours (loss of coverage eligibility) | Employee + dependents | 18 months | E.g., moving from full-time to part-time |
| Employee becomes entitled to Medicare | Spouse + dependents | 36 months | Employee loses COBRA; dependents get extended coverage |
| Divorce or legal separation | Former spouse + dependents | 36 months | Former spouse must notify plan within 60 days |
| Death of covered employee | Spouse + dependents | 36 months | Surviving family members maintain coverage |
| Dependent child ages out of coverage | Child | 36 months | Typically at age 26 under ACA |
| Employer bankruptcy (retiree coverage) | Retirees + dependents | Lifetime (specific rules) | Rare; applies when employer filed bankruptcy and provided retiree coverage |
Note: Termination for "gross misconduct" is the only termination that does not trigger COBRA. Courts interpret gross misconduct narrowly — it generally requires intentional, serious wrongdoing, not merely poor performance.
How much does COBRA cost?
COBRA shifts the entire premium cost to the individual. The maximum allowable charge is:
COBRA premium = 102% of total plan cost
(Employer share + Employee share + 2% administrative fee)
For example, if your group plan costs $800/month total (you were paying $600 and the employee was paying $200), the COBRA premium would be $816/month ($800 x 102%). The employee goes from paying $200/month to $816/month for the same coverage.
For the disability extension period (months 19-29), the charge increases to 150% of the premium.
As a practical matter, this cost shock leads many COBRA-eligible individuals to choose ACA marketplace plans instead, especially if they qualify for premium subsidies based on their reduced income after job loss.
What is mini-COBRA? (State laws for smaller employers)
About 40 states have enacted their own health insurance continuation laws — often called "mini-COBRA" — that apply to employers too small for federal COBRA. Duration and specific rules vary by state.
| State | Employer Size | Duration | Notes |
|---|---|---|---|
| Arkansas | 1-19 | 120 days | Limited continuation; approximately 4 months |
| California (Cal-COBRA) | 2-19 | 36 months | Among the most generous; extends to 36 months |
| Colorado | 1-19 | 18 months | Mirrors federal COBRA for small employers |
| Connecticut | 1-19 | 36 months | 36 months for all qualifying events |
| Florida | 1-19 | 18 months | 18 months continuation |
| Georgia | 1-19 | 3 months | Shorter duration than federal |
| Illinois | 1-19 | 12 months | 12 months continuation |
| Iowa | 1-19 | 9 months | 9 months continuation |
| Kansas | 1-19 | 18 months | Mirrors federal |
| Kentucky | 1-19 | 18 months | Mirrors federal |
| Louisiana | 1-19 | 12 months | 12 months continuation |
| Maine | 1-19 | 12 months | 12 months continuation |
| Maryland | 1-19 | 18 months | Mirrors federal |
| Massachusetts | 1-19 | 36 months | Among the most generous state programs |
| Minnesota | 1-19 | 18 months | Mirrors federal |
| Missouri | 1-19 | 18 months | Mirrors federal |
| Nebraska | 1-19 | 6 months | Shorter duration |
| New Hampshire | 1-19 | 36 months | 36 months for all events |
| New Jersey | 2-50 | Up to 36 months | Covers employers up to 50; generous duration |
| New York | 1-19 | 36 months | 36 months continuation |
| North Carolina | 1-19 | 18 months | Mirrors federal |
| North Dakota | 1-19 | 39 weeks | Approximately 9 months |
| Ohio | 1-19 | 12 months | 12 months continuation |
| Oregon | 1-19 | 9 months | 9 months continuation |
| Rhode Island | 1-19 | 18 months | Mirrors federal |
| South Carolina | 1-19 | 6 months | Shorter duration |
| South Dakota | 1-19 | 18 months | Mirrors federal |
| Tennessee | 1-19 | 15 months | 15 months continuation |
| Texas | 1-19 | 9 months | 9 months for small groups |
| Utah | 1-19 | 12 months | 12 months continuation |
| Vermont | 1-19 | 18 months | Mirrors federal |
| Virginia | 1-19 | 12 months | 12 months continuation |
| Washington | 1-19 | 18 months | Mirrors federal for termination/reduction |
| West Virginia | 1-19 | 18 months | Mirrors federal |
| Wisconsin | 1-19 | 18 months | Mirrors federal |
| Wyoming | 1-19 | 12 months | 12 months continuation |
What are the employer's COBRA notification obligations?
1. General notice (at enrollment)
Provide a general COBRA rights notice to all covered employees and spouses when they first enroll in the group health plan. This notice must be provided within 90 days of coverage beginning. The DOL provides a model general notice that employers can customize.
2. Notify plan administrator (within 30 days)
When a qualifying event occurs (termination or reduction in hours), the employer must notify the plan administrator within 30 days of the event. If the employer is the plan administrator (common for small businesses), this step is internal but must still be documented. For divorce, legal separation, or a child aging out, the employee or beneficiary must notify the plan administrator within 60 days.
3. Election notice (within 14 days)
The plan administrator must send a COBRA election notice to each qualified beneficiary within 14 days of receiving notice of the qualifying event. This notice must explain their COBRA rights, the plans available, the premium cost, how to elect, the election deadline, and contact information. The DOL provides a model election notice. The total maximum time from qualifying event to election notice is 44 days (30 days employer + 14 days plan admin).
4. Beneficiary deadline: 60 days to elect
The qualified beneficiary has 60 days from the later of the qualifying event date or the date the election notice is provided to elect COBRA coverage. Each qualified beneficiary (employee, spouse, dependent children) can independently elect or decline COBRA. Election is retroactive — coverage is continuous from the date of the qualifying event.
5. Payment: 45 days for first premium
After electing, the beneficiary has 45 days to make the first premium payment (retroactive to the coverage gap). Subsequent payments are due on the first of each month with a 30-day grace period. If the beneficiary misses a payment after the grace period, COBRA coverage can be terminated retroactively to the last day for which payment was received.
6. Notice of early termination
If COBRA coverage terminates before the maximum period (e.g., the beneficiary obtains other coverage, fails to pay premiums, or the employer eliminates the group plan), you must provide written notice of early termination as soon as practicable after the decision is made. The notice must include the termination date, reason, and any rights the beneficiary may have.
7. Unavailability of coverage notice
If you determine a beneficiary is not entitled to COBRA (e.g., gross misconduct termination, did not meet eligibility), you must send a notice explaining why within 14 days.
What are the penalties for COBRA non-compliance?
COBRA penalties come from multiple sources and can be devastating for small employers:
| Penalty Type | Amount | Imposed By | Details |
|---|---|---|---|
| IRS excise tax | $100/day per affected beneficiary ($200/day if 2+ family members) | IRS (IRC Section 4980B) | Accrues each day of non-compliance. Minimum tax of $2,500 per qualifying event (up to $500,000 for multiple events per year for unintentional failures). |
| DOL civil penalty | Up to $110/day per violation (adjusted for inflation) | DOL/EBSA | For failure to provide required COBRA notices. The DOL can also bring suit to compel compliance. |
| Private lawsuits | Benefits owed + statutory penalties up to $110/day + attorney fees | Federal courts (ERISA Section 502) | Affected beneficiaries can sue for the value of lost coverage, statutory penalties, and reasonable attorney fees and costs. |
| Medical claims liability | Full cost of uncovered medical expenses | Courts | If a beneficiary incurs medical expenses during a period when they should have had COBRA coverage but were not notified, the employer may be liable for those expenses. |
Example:You terminate an employee on January 1 and fail to send the COBRA election notice. The former employee has a $50,000 surgery in March. You could owe: the $50,000 in medical expenses (because COBRA should have been offered), plus IRS excise taxes of $100/day x 90 days = $9,000, plus DOL penalties, plus the former employee's attorney fees. Total exposure can easily exceed $75,000 for a single missed notice.
Frequently asked questions
Does COBRA apply to my small business?
Federal COBRA applies to private-sector employers with 20 or more employees on more than 50% of business days in the prior calendar year. If you have fewer than 20 employees, federal COBRA does not apply to you. However, about 40 states have 'mini-COBRA' laws that extend similar continuation rights to employees of smaller businesses. Check your state's requirements.
How much does COBRA coverage cost the employee?
COBRA allows the employer to charge the employee up to 102% of the full premium cost — that is the employer's share plus the employee's share plus a 2% administrative fee. For disability extensions (months 19-29), the employer can charge up to 150%. Since the employer was typically paying 70-80% of the premium, COBRA is significantly more expensive for the employee than their prior contribution. The average COBRA premium for individual coverage is approximately $700-$900/month.
Does the employer have to pay any portion of COBRA premiums?
No. Under standard COBRA, the employer has no obligation to subsidize the premium. The entire cost (up to 102%) is borne by the former employee or beneficiary. The employer's obligation is administrative — providing timely notice, maintaining the coverage, and processing premium payments. During the COVID-19 pandemic, the American Rescue Plan temporarily provided a 100% COBRA subsidy, but that has expired.
What is the notification timeline for COBRA?
The employer must notify the plan administrator within 30 days of a qualifying event (termination or reduction in hours). The plan administrator must then send the COBRA election notice to the qualified beneficiary within 14 days. The beneficiary has 60 days from the later of the qualifying event or the election notice to elect COBRA. After electing, they have 45 days to make the first premium payment (retroactive to the qualifying event date). Missing any of these deadlines has consequences — for the employer, it means potential liability; for the beneficiary, it means loss of COBRA rights.
What happens if I fail to provide COBRA notices?
Penalties for COBRA non-compliance are severe. The IRS can impose an excise tax of $100 per day per affected beneficiary for each day of non-compliance (up to $200/day if more than one family member is affected). The DOL can impose penalties of up to $110 per day. Additionally, affected beneficiaries can sue for benefits, plus attorney fees and costs. Courts have also awarded statutory penalties. In extreme cases, employers have faced six-figure judgments for COBRA notice failures.
Can a terminated employee get health insurance through the ACA marketplace instead of COBRA?
Yes. Job loss is a qualifying life event that triggers a 60-day special enrollment period on the ACA marketplace. In many cases, marketplace plans are cheaper than COBRA because the employee may qualify for premium tax credits based on their income. COBRA maintains the exact same plan, network, and benefits, which can be valuable if continuity of care is important. Employees should compare both options before deciding.
Does COBRA apply to dental and vision plans?
Yes. COBRA applies to all group health plans maintained by the employer, including medical, dental, vision, health FSAs (with limitations), and EAPs that provide medical care. It does not apply to life insurance, disability insurance, or non-health benefits. If you offer standalone dental or vision plans, COBRA continuation rights apply to those plans separately.
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- Employment Lawat-will employment — what it means
- Required Benefitsrequired employee benefits by state
This is general information, not legal or insurance advice. COBRA rules are complex and penalties are severe. Consult a benefits attorney or qualified COBRA administrator for advice specific to your situation. Sources: U.S. Department of Labor, IRS, CMS, NCSL.