What happens if an employer fails to send COBRA notices?

When an employee loses health coverage due to a qualifying event, such as termination or a reduction in hours, federal law requires employers to notify them of their right to continue coverage under COBRA. While this may appear to be a routine administrative task, the consequences of failing to send proper COBRA notices can be severe and costly.

Many employers underestimate the importance of COBRA compliance. From IRS excise taxes that can accumulate at $100 per day per affected individual to potential lawsuits seeking reimbursement for uncovered medical expenses, the financial and legal risks are substantial.

This post explains:

• Why COBRA notices matter for compliance and coverage
• How notice failures expose employers to penalties and lawsuits
• The types of COBRA notices and who must receive them

Understanding these obligations is critical for protecting both your organization and your former employees.

COBRA basics every employer should know

What is COBRA?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law enacted in 1985 that requires employers with 20 or more employees to offer temporary continuation of group health coverage when coverage would otherwise end due to certain qualifying events.

Key points:

• Applies to private-sector employers and state and local governments
• Allows qualified beneficiaries to continue the same coverage they had while employed
• Coverage typically lasts 18 months, with extensions to 29 or 36 months in certain circumstances
• Beneficiaries may be charged up to 102% of the total premium

Who is eligible for COBRA?

COBRA eligibility extends to individuals known as qualified beneficiaries:

Employees

Eligible when they experience:

• Voluntary or involuntary termination (excluding gross misconduct)
• Reduction in hours resulting in loss of coverage

Spouses

Eligible when:

• The employee becomes entitled to Medicare
• The employee experiences termination or reduction in hours
• Divorce or legal separation occurs
• The employee dies

Dependent Children

Eligible when:

• A qualifying event affects the covered parent
• They lose dependent status under the plan (for example, aging out)

Key COBRA notices employers must send

COBRA compliance requires several distinct notices, each with specific timing and content requirements.

General notice (initial rights notice)

• Provided to employees and spouses when group health coverage begins
• Explains COBRA rights in general terms
• Informs participants of their responsibility to report certain qualifying events

Timing: Within 90 days of coverage starting

COBRA election notice

The most critical COBRA notice.

Must explain:

• The right to elect COBRA continuation coverage
• Available coverage options
• Premium costs
• Election deadlines (generally 60 days)
• Duration of coverage
• How to elect coverage

This notice triggers the beneficiary’s legal right to elect COBRA.

Notice of unavailability of COBRA

Required when an individual is not eligible for COBRA, such as when:

• The individual was not covered at the time of the event
• The employer is not subject to COBRA
• The event does not qualify

This notice helps document proper evaluation and protects the employer.

Early termination notice

Required when COBRA coverage ends early due to:

• Failure to pay premiums
• Coverage under another group health plan
• Medicare entitlement

Must explain the reason and effective date of termination.

Employer obligations under COBRA

COBRA notice deadlines

General Notice:

• Within 90 days of coverage start

Election Notice:

• Within 44 days of the qualifying event or loss of coverage (whichever is later)

Required content in COBRA notices

COBRA notices must clearly describe:

Coverage Options

• Medical
• Dental
• Vision
• Any other applicable benefits

Premium Information

• Monthly cost
• Payment methods and due dates
• Grace periods
• Consequences of non-payment

Election Deadlines

• 60-day election window
• How and where to submit elections

Rights and Responsibilities

• Coverage duration
• Extension and early termination rules
• Notification obligations
• Conversion rights, if applicable

Coordination with carriers and TPAs

Outsourcing COBRA administration to a qualified third-party administrator (TPA) can significantly reduce compliance risk and administrative burden for employers. Experienced TPAs specialize in COBRA regulations, notice requirements, and deadline management, helping ensure notices are sent accurately and on time.

Key benefits of working with a COBRA TPA include:

• Regulatory expertise: TPAs stay current on COBRA, ERISA, and related regulatory changes, reducing the risk of outdated or non-compliant notices.
• Automated notice delivery: TPAs use systems that automatically generate and send required notices based on qualifying events, minimizing human error.
• Deadline tracking and escalation: Built-in workflows help ensure statutory deadlines are met and flagged if action is required.
• Proof-of-delivery documentation: Reputable TPAs maintain audit-ready records showing when and how notices were sent.
• Coordination with carriers: TPAs regularly interface with insurance carriers to manage enrollments, terminations, and coverage changes efficiently.

Partnering with a reliable TPA is one of the most effective ways to reduce risk. Employers should still maintain oversight by establishing clear service level agreements, regularly reviewing reports, and ensuring timely communication of qualifying events—but a strong TPA relationship turns COBRA from a high-risk administrative task into a managed, repeatable process.