COBRA can be a source of confusion for employers — leaving many to wonder… does an employer have to offer COBRA?. With strict compliance requirements and high stakes for noncompliance, it’s essential for employers to understand when they’re obligated to offer COBRA, who it applies to, and what’s required to remain compliant.
Yes — but only if you meet certain criteria
COBRA isn’t mandatory for every employer. You’re only required to offer COBRA continuation coverage if:
- Your company has 20 or more employees on more than 50% of its typical business days in the previous calendar year
- You’re a private-sector employer or state/local government
- You offer a group health plan
If your company doesn’t provide a group health plan, COBRA doesn’t apply. Also, smaller businesses (fewer than 20 employees) aren’t subject to federal COBRA — but they may still fall under state mini-COBRA laws. These laws vary by state and may impose similar continuation coverage requirements.
What is COBRA and why does it matter?
COBRA, short for the Consolidated Omnibus Budget Reconciliation Act, allows employees and their dependents to temporarily continue their group health coverage after losing it due to specific qualifying events. For employers, COBRA isn’t just a courtesy — it’s a legal obligation. Failing to comply can lead to costly penalties and potential lawsuits.
Who must be offered COBRA coverage?
Employees and dependents
COBRA must be offered to anyone who was covered under the group health plan the day before a qualifying event, including:
- Employees
- Spouses
- Dependent children
Qualifying events that trigger COBRA
Common events that trigger COBRA eligibility include:
- Voluntary or involuntary job loss (except for gross misconduct)
- Reduction in hours
- Divorce or legal separation
- Death of the covered employee
- The covered employee becoming eligible for Medicare
- A dependent child ceasing to be a dependent under the plan’s terms
What group health plans are subject to COBRA?
COBRA generally applies to group health plans provided by employers. This includes:
- Medical
- Dental
- Vision
- Prescription drug
- Health reimbursement arrangements (HRAs)
It does not apply to:
- Life insurance
- Disability insurance
- Long-term care coverage
What are an employer’s COBRA responsibilities?
COBRA administration involves several key responsibilities that must be followed carefully:
Distribute required notices
Employers must provide a series of notices, including the General Notice (at the start of coverage) and the COBRA Election Notice after a qualifying event.
Provide a 60-day election window
Individuals eligible for COBRA must be allowed a minimum of 60 days to choose whether they want to continue their coverage.
Continue with identical coverage
COBRA coverage must be identical to what the employee had before the qualifying event. If the plan changes for active employees, COBRA coverage must reflect those changes.
Distribute required notices
COBRA coverage must typically be offered for 18 or 36 months, depending on the qualifying event.
Provide a 60-day election window
Employers must notify the plan administrator and the qualified beneficiary if COBRA coverage will terminate before the maximum coverage period ends.
Maintain coverage for required period
COBRA coverage must typically be offered for 18 or 36 months, depending on the qualifying event.
Notify if coverage will end early
Employers must notify the plan administrator and the qualified beneficiary if COBRA coverage will terminate before the maximum coverage period ends.
How much does COBRA cost and who pays?
Under COBRA, the cost of coverage is typically paid by the former employee or their dependents. Employers may charge:
- Up to 102% of the plan’s total premium (100% + 2% administrative fee)
- Up to 150% in the final 11 months of disability extension (if applicable)
Because the cost shifts entirely to the former employee, COBRA coverage can be expensive — though it offers continuity of care and access to the same network of providers.
What happens if an employer doesn’t comply?
Noncompliance can result in severe financial penalties, including:
- IRS excise taxes of $100 per day per individual (or $200 for families)
- Potential Employee Retirement Income Security Act (ERISA) penalties of up to $110 per day
- Lawsuits and legal fees
That’s why accurate, timely administration of COBRA is essential.
What about small businesses? (Mini-COBRA laws)
Even if your business isn’t subject to federal COBRA, you may still have obligations under state continuation coverage laws, commonly known as mini-COBRA. These laws apply to employers with fewer than 20 employees, but the specifics — such as duration and eligibility — vary widely by state.
Employers should check with their state’s Department of Insurance or consult with a compliance expert to understand their responsibilities.
Can employers cancel COBRA coverage?
Employers can terminate COBRA coverage early only under certain conditions, such as:
- Nonpayment of premiums
- The beneficiary becomes covered under another group health plan
- The beneficiary becomes eligible for Medicare
- The employer ceases to offer any group health plans
Otherwise, coverage must remain in place for the full period the law requires.
Is COBRA the only option for employees?
No — while COBRA offers the most seamless continuation of coverage, it’s not the only choice. Other options include:
- Marketplace plans (which may be more affordable and come with subsidies)
- Spouse’s group plan (if available)
- Medicaid, depending on income and eligibility
Employees should evaluate all options before electing COBRA coverage.
Final takeaways
COBRA compliance is not optional for eligible employers. If you offer a group health plan and have 20 or more employees, you must provide continuation coverage to employees and their dependents after qualifying events.
And even if you’re a small business, don’t assume you’re exempt — mini-COBRA laws could still apply.
To stay compliant:
- Understand your obligations
- Distribute notices on time
- Track qualifying events closely
- Work with a trusted COBRA administrator
Staying ahead of COBRA requirements helps avoid costly mistakes — and ensures employees maintain access to the care they need during transitional periods.
