Administering employee benefits doesn’t stop when an employee leaves the company. COBRA coverage allows eligible employees and their dependents to continue group health benefits after a qualifying event. For HR teams, understanding COBRA is essential, not just to comply with federal law, but also to help departing employees transition smoothly while minimizing risk to the organization. This guide explains employer responsibilities, coverage requirements, and best practices for COBRA administration.
What is COBRA coverage?
COBRA (Consolidated Omnibus Budget Reconciliation Act) provides temporary continuation of group health benefits for employees and their families after certain qualifying events. Its purpose is to protect employees during periods of transition, ensuring they do not lose coverage abruptly. For employers, offering COBRA is not optional because compliance is required by law.
Who must be offered COBRA coverage?
Eligibility requirements
Employers must offer COBRA coverage to all employees, spouses, and dependents who were covered under the group health plan before a qualifying event.
Qualifying events
Common triggers include:
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- Job termination, voluntary or involuntary (except for gross misconduct)
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- Reduction in work hours
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- Divorce or legal separation
- Death of the covered employee
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Special situations
HR teams should also consider unique cases such as furloughs, company closures, or when the employer discontinues the health plan. Each scenario has specific rules regarding COBRA eligibility and coverage duration.
What benefits must be offered under COBRA?
Types of coverage
COBRA generally applies to the same medical, dental, vision, and other group health benefits that active employees receive.
Coverage length and extensions
Standard coverage lasts up to 18 months, with extensions available in certain situations, for example, disability or secondary qualifying events.
Limitations
Employers should note that COBRA does not cover benefits that were never part of the plan or optional supplemental benefits unless specifically included in the plan terms.
Employer responsibilities in administering COBRA
Notification requirements
Employers must provide timely COBRA notices to eligible individuals, outlining their rights and deadlines for electing coverage.
Enrollment process
HR teams are responsible for guiding employees through the election process, tracking enrollment forms, and ensuring proper documentation.
Maintaining compliance
Accurate recordkeeping, timely communication, and coordination with third-party administrators are critical to avoid penalties.
COBRA costs and payment rules
Premium structure
Under COBRA, employees generally pay the full premium for coverage plus a 2% administrative fee.
Payment timelines
Employers must communicate deadlines for initial and ongoing payments and ensure grace periods are clearly defined.
Employer considerations
Missed payments, late elections, or administrative errors can create compliance issues. HR teams should have clear policies for handling these situations.
Alternatives employers should communicate to terminated employees
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- Marketplace coverage options under the Affordable Care Act
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- Medicaid or CHIP eligibility for low-income employees
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- Mini-COBRA programs for employers with fewer than 20 employees
- Private health insurance alternatives
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Guiding employees toward the best option helps maintain goodwill and reduces confusion during the transition.
Common COBRA administration questions for employers
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- How to handle voluntary resignations
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- Can coverage be canceled early if an employee gains alternative insurance?
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- What to do when an employee becomes Medicare-eligible
- Managing overlapping COBRA and Medicare coverage
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Having clear, documented procedures ensures consistent and compliant administration.
When COBRA coverage makes sense
COBRA is often the best option when employees need continuity of care or have specific health needs. However, in some cases, other coverage options may be more cost-effective or better suited to the individual. HR teams should provide guidance without giving personal advice.
Key takeaways for employers
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- COBRA compliance is mandatory and carries strict timelines and notification requirements.
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- Clear processes, documentation, and coordination with administrators help minimize risk.
- Providing transparent information about COBRA and alternatives improves the employee experience and protects your organization.
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Conclusion
For HR teams, understanding COBRA is more than a legal requirement. It is a critical part of supporting employees during transitions. By establishing strong administration practices and clearly communicating options, employers can ensure compliance, reduce risk, and help former employees maintain access to essential health benefits.
