The Consolidated Omnibus Budget Reconciliation Act (COBRA) is intended to ensure that employees and their dependents can maintain their group healthcare coverage following certain events that otherwise would result in termination of coverage. COBRA’s protections are temporary and are intended as a stopgap until insurance is obtained from another source, such as a new employer. Employers do not have to pay for any portion of the premiums for COBRA coverage, but the beneficiaries get to maintain their insurance at less expensive group rates.

COBRA requires group health plans sponsored by covered employers to allow qualified beneficiaries to have "COBRA continuation coverage" in the event that they lose group health plan coverage for specified reasons. COBRA applies only to employers that had 20 or more employees on more than 50 percent of typical business days during the prior calendar year. In some situations, insured employees have continuation rights under both federal and state law. In such cases, employees may choose the more favorable law. Under both federal and almost all state laws, continuation requires the insured to pay the full premium (including the former employer's share), but the insured does get the advantage of cheaper group rates.

Federal COBRA continuation does not apply to any employer-sponsored group health plan if the employer normally employed fewer than 20 employees during the prior calendar year. An employer is considered to have normally employed fewer than 20 employees during a particular calendar year if it had fewer than 20 employees on at least 50 percent of its typical business days during that year. When counting employees for this purpose, only “common-law employees” are counted. Thus, self-employed individuals, independent contractors, and directors are not counted. Employees of all members of a controlled group are counted, including employees of a foreign member of the controlled group. Part-time employees are also counted as a fractional equivalent of a full-time employee. The fractional equivalent is calculated by dividing the hours that the part-time employee works per week by the number of hours that an employee must work in order to be considered a full-time employee.

Covered employees. A “covered employee” is an individual who is eligible to be covered under a group health plan by virtue of the performance of services for the employer maintaining the plan or membership in the employee organization maintaining the plan. Self-employed individuals, independent contractors (and their employees), and corporate directors are considered to be “covered employees” if their relationship to the employer maintaining the plan makes them eligible to be covered under the plan.

Qualified beneficiaries. A "qualified beneficiary" is an individual who, on the day before a “qualifying event,” is covered by a group health plan maintained by an employer. The individual can be a covered employee, the spouse of a covered employee, or a dependent child of the covered employee. A special rule allows a child who is born to or placed for adoption with a covered employee during a period of COBRA continuation coverage to be a qualified beneficiary.

Group health plan. A “group health plan” for purposes of COBRA is defined as an employee benefit plan providing “medical care” to participants or beneficiaries directly or through insurance, reimbursement, or otherwise. Coverage may be provided through insurance, an on-site facility, or be self-funding. This definition is quite broad and includes plans that are both contributory and noncontributory. However, specifically excluded from coverage are plans where substantially all the benefits are for qualified long-term care services.

Medical care. Medical care includes the diagnosis, cure, medication, treatment, or prevention of disease, or any other undertaking for the purpose of affecting any structure or function of the body. It also includes transportation that is essential to such health care. On the other hand, medical care does not include benefits that are merely beneficial to the general health of an individual, such as a vacation.

Qualifying events. Qualifying events are the events whose occurrence entitle an individual to COBRA continuation coverage if the event causes loss of coverage.

COBRA continuation coverage is an extension of the coverage that the qualified beneficiary had immediately before the qualifying event. The plan sponsor must provide an opportunity for qualified beneficiaries of a plan to continue coverage if they would lose coverage as a result of a qualifying event. COBRA continuation coverage must be the same as the coverage provided to similarly situated beneficiaries with respect to whom a qualifying event has not occurred. Modifications to the plan will apply to qualified beneficiaries if such modifications apply to similarly situated beneficiaries for whom a qualifying event has not occurred.

The length of time an insured must be allowed to continue coverage depends upon the qualifying event, i.e., the reason the individual has lost group coverage. In cases where an employer is covered by both state and federal law, the law more favorable to the employee applies. For specific state-law continuation rights,

The following events qualify an individual for COBRA continuation coverage if the event causes loss of coverage for a qualified beneficiary:

Termination for gross misconduct is not a qualifying event, and COBRA continuation coverage does not have to be offered to an employee terminated for gross misconduct and his or her spouse and dependent children. The term “gross misconduct” is not defined either in the statute or in the regulations, and no standard has been consistently articulated or applied by courts or regulators. Accordingly, any decision to deny COBRA coverage based on an employee’s gross misconduct should be reviewed by an attorney.

In general, benefits under COBRA continuation coverage begin on the date of the qualifying event. Thus, the beginning date for calculating how long the benefits last is usually the date of the qualifying event. COBRA continuation rights are generally limited to either 18 or 36 months (with the exception of bankruptcy as the qualifying event).

18 months. A qualified beneficiary is entitled to continue coverage under COBRA for a maximum period of 18 months if coverage would otherwise end due to:

36 months. A qualified beneficiary who is a spouse or dependent child is entitled to continue coverage under COBRA for a maximum period of 36 months if coverage would otherwise end due to:

Second qualifying events. If a qualified beneficiary is otherwise entitled to a maximum of 18 months of continuation coverage, the qualified beneficiary may become entitled to an additional 18-month extension (giving a total maximum period of 36 months of continuation coverage) if the qualified beneficiary experiences certain second qualifying events. Such events include:

However, the second event can be a second qualifying event only if it would have caused the qualified beneficiary to lose coverage under the plan in the absence of the first qualifying event.

Lifetime of retiree. A qualified beneficiary who is a retired employee and his or her spouse and dependent children are allowed to continue coverage for the retiree's lifetime if coverage would otherwise end due to a bankruptcy proceeding plus an additional 36 months for a surviving spouse and dependent children.

Qualified beneficiaries become eligible for a disability extension of 11 additional months (to a total of 29 months) if any of the individuals who lost coverage because of the same qualifying event is determined to be disabled for Social Security purposes during the first 60 days following the qualifying event. Thus, the employee, his or her spouse, and any dependents who were covered before the employee losing his or her job or having a reduction in hours are all separately entitled to the extension if any one of them meets the disability criteria.

The disabled qualified beneficiary (or another person on his or her behalf) must also notify the plan of the disability determination before the end of the 18-month period following the qualifying event (i.e., the covered employee's termination of employment or reduction of hours). The plan can set a time limit for providing this notice of disability, but the time limit cannot be shorter than 60 days, starting from the latest of:

The right to the disability extension may be terminated if the SSA determines that the disabled qualified beneficiary is no longer disabled. The plan can require qualified beneficiaries receiving the disability extension to notify it if the SSA makes such a determination, although the plan must give the qualified beneficiaries at least 30 days after the SSA determination to give such notice.

A child born or placed for adoption during the COBRA period is a qualified beneficiary. Thus, COBRA participants must be allowed to change their coverage status upon the birth or adoption of a child so that the child is covered for the balance of the continuation period. The length of the child's COBRA coverage is measured from the date of the original qualifying event.

A COBRA beneficiary must be given the same open enrollment period rights as similarly situated active employees covered by the plan, including the right to switch to another plan, another benefit package, or to add or eliminate coverage of family members.

A qualified beneficiary receiving COBRA coverage has the same special enrollment and open enrollment rights to add coverage for family members as do similarly situated active employees covered by the plan. Children born to or adopted by a qualified beneficiary are qualified beneficiaries, and COBRA coverage may be elected for them. New spouses may be added during special enrollment periods. Spouses and dependents may also be added to coverage during open enrollment periods if the plan allows active employees to do so. New spouses added during special enrollment periods and spouses and dependents added during an open enrollment period are not qualified beneficiaries and are not eligible for extended coverage if the qualified beneficiary experiences a second qualifying event.

Continuees may be charged no more than 102 percent of the group rate. For self-insured plans, the charge may be based on actuarial estimates, or in certain cases on the previous year's costs, adjusted for inflation. Premiums from continuees are “timely” if received within 30 days of the due date (or the time allowed by the insurer, if longer).

The right to COBRA continuation of coverage can be cut off prematurely if:

Department of Labor (DOL) regulations clarify the various COBRA notice requirements (29 CFR 2590.606-1et seq.). The regulations cover the following:

Given the importance of Medicare availability to qualified beneficiaries, in May 2020 the DOL updated its model COBRA notices (both the general notice and the qualifying event notice) to elaborate on the consequences of Medicare entitlement.

The General Notice of COBRA Rights provides basic information about COBRA. It must be provided to covered employees and spouses by the latter of 90 days after plan coverage begins or 90 days after the plan first becomes subject to COBRA. Including the required information in the summary plan description (SPD), which must be distributed by the same deadline, can also satisfy the requirement. But note, the SPD only has to go to the covered employee, not to the spouse.

If “on the basis of the most recent information available to the plan” a married couple resides at the same address, one notice addressed to both can be used. If the employee and spouse enroll at different times, a separate notice must be sent to each. There is no requirement to furnish a general notice to dependent children. The regulation lists the required contents and includes a model notice that may be used and, when appropriately modified and supplemented, will be deemed to satisfy the content requirement.

Contents of the general notice. The general notice must be written so it can be understood by the average plan participant and must contain the following information:

A model general notice may be obtained at https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra.

Delivery of the general notice. Plan administrators are to deliver the general notice by means reasonably calculated to ensure actual receipt of the material by plan participants and beneficiaries. The notice must be sent by a method or methods likely to result in full distribution. In-hand delivery to an employee at his or her worksite is acceptable, but merely placing copies of the material in a location frequented by participants is never okay. It is also acceptable to include the notice as a special insert in a periodical distributed to employees, such as a union newspaper or a company publication, if the distribution list for the periodical is comprehensive and up to date. Also, a prominent notice on the front page of the periodical should advise readers that the issue contains a notice about rights under the plan and the law that should be read and retained for future reference.

The notice may be distributed through the mail by first, second, or third class. However, distribution by second- or third-class mail is acceptable only if return and forwarding postage is guaranteed and address correction is requested. Any material sent by second- or third-class mail that is returned with an address correction must be sent again by first-class mail or personally delivered to the participant at his or her worksite.

Electronic distribution. Electronic media may be used for the general notice in accordance with the procedures established by the DOL for other benefit plan disclosures. Please see the national Benefits Recordkeeping and Disclosures section.

Substituting the election notice for the general notice. It is possible that a plan administer may be required to provide an election notice before the time limit for providing the general notice has expired. In such a case, the DOL says that it will be sufficient to provide the election notice only.

Employer's qualifying event notice to plan administrator. Employers must notify plan administrators of qualifying events, including terminations of employment, reductions in hours, death of the employee, bankruptcy of the employer, or the employee's Medicare entitlement, within 30 days of the event (29 CFR Sec. 2590.606-2).

Employee or family member notice to plan administrator. Employees or their family member must notify the plan administrator of qualifying events such as divorce or legal separation and loss of dependent status (including when these are second qualifying events) and of a qualified beneficiary's disability or cessation of disability (29 CFR Sec. 2590.606-3). Plans must establish a reasonable procedure for furnishing these notices. A plan's procedure generally will be deemed reasonable if it is described in the plan's SPD, specifies who is designated to receive notices, specifies how qualified beneficiaries must give the notice, and lists the required content of the notice. If a plan does not have reasonable procedures, notice will be deemed to have been provided if information adequately identifying a specific qualifying event is communicated to any of the parties that would customarily be considered in charge of the plan. A specific notice form may be required.

Warning: A plan without a reasonable procedure will have to accept written and oral notices that identify a qualifying event and are made in a way that is reasonably calculated to bring the information to the attention of either the organizational unit that customarily handles benefit matters or any officer of the employer. This means an oral notice to anyone with authority or responsibility for health benefits may satisfy the requirement.

A plan may not reject an incomplete notice as untimely if the notice is provided within the plan's time limits and contains enough information to enable the plan administrator to identify the plan, the covered employee, qualified beneficiaries, the qualifying event or disability determination, and the date on which it occurred. The plan administrator can require qualified beneficiaries to supply the missing information.

The period for providing a notice of a qualifying event must run to at least 60 days following the qualifying event. If the plan provides that COBRA begins when coverage is actually lost, the 60 days begin then.

The notice that plan administrators provide to qualified beneficiaries must be in writing and must be provided within 14 days after receipt of a notice of a qualifying event from the employer or from the employee or family member (29 CFR Sec. 2590.606-4). In cases where the employer is the plan administrator, this notice is due within 44 days of the event or loss of coverage (whichever applies). This notice must include the following information:

This election notice must go to each qualified beneficiary except that a single notice may go to a covered employee and spouse residing at the same address, or to the covered employee or spouse for each dependent child residing at the same address. Determination of residence may be made “on the basis of the most recent information available to the plan.”

Model Election Notice and Election Form. The DOL has issued a Model COBRA Continuation Election Notice and Election Form that includes all the required content. The model election notice may be obtained at https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra.

Since some qualified beneficiaries may want to consider and compare health coverage alternatives to COBRA continuation coverage that are available through health insurance exchanges (or “marketplaces”), the DOL has modified the election notice under COBRA to include this information.

Notice of unavailability of continuation coverage. The DOL's COBRA notice regulations add two additional notice requirements for plan administrators not specified in the COBRA statute. The first is the notice of unavailability of continuation coverage (29 CFR Sec. 2590.606-4). This notice must be provided after receiving a notice of a qualifying event from an employee or family member if the plan determines that an individual is not eligible for COBRA. This notice should explain why the individual is not entitled to continuation coverage and should be provided within 14 days after the plan administrator received notice of the qualifying event from the individual.

Notice of termination of continuation coverage. The second additional requirement is a notice of termination of continuation coverage that must be provided when the plan terminates coverage before the end of the maximum coverage period (29 CFR Sec. 2590.606-4). This notice must be in writing and contain the reason for the early termination, the date of the termination, and the rights the qualified beneficiary may have to alternative coverage. The early termination notice must be provided as soon as practicable following the decision to terminate.

The DOL has not issued model language for the notice of ineligibility for COBRA coverage and the notice of early termination of COBRA coverage.

In response to the COVID-19 outbreak, the DOL (through the EBSA) and Treasury (IRS) published a notice, and the EBSA issued a package of guidance and relief, for affected employee benefit plans.

According to the EBSA/IRS notice, published May 4, 2020 (85 Fed. Reg. 26351), group health plans must disregard the “outbreak period” for purposes of determining certain COBRA-related deadlines. The defined “outbreak period” runs from March 1, 2020, until 60 days after the COVID-19 national emergency ends (or such other date as the federal agencies announce). On January 30, 2023, President Joe Biden announced that the national emergency would end on May 11, meaning that the outbreak period would end on July 10. Biden later signed a bill to end the national emergency sooner, on April 10, but the outbreak period apparently still goes until July 10 (see “End of Outbreak Period,” below).

With regard to COBRA compliance, the outbreak period must be disregarded for purposes of:

However, this deadline relief was limited to one year by ERISA Section 518. On February 26, 2021, the EBSA announced that the extensions would expire for each individual one year after their COBRA election, for example, otherwise would have been due.

Specifically, according to EBSA Disaster Relief Notice 2021-01, a deadline will be tolled until the earlier of (i) one year from the date the individual was first eligible for the relief, or (ii) the end of the still-ongoing outbreak period. This means that every plan participant and beneficiary who was subject to a deadline that expired March 1, 2020, or later has until the 1-year anniversary of that deadline to take the required action (that is, elect or pay for COBRA coverage, exercise a special enrollment right, or file a claim or appeal).

The one-year tolling relief periods run concurrently, not consecutively, for COBRA elections and initial premium payments run concurrently not consecutively, the IRS clarified in Notice 2021-58. Therefore, a qualified beneficiary generally has only one year of total disregarded time for the election and initial payment periods.

Relief for plans. In addition to the above relief for COBRA beneficiaries, Notice 2020-01 provided some relaxed standards for delivery of required notices. A responsible plan fiduciary will not be in violation of ERISA for failure to timely furnish a notice, disclosure, or other required document during the outbreak period, if:

Good faith includes using electronic alternative means of communicating with plan participants and beneficiaries who the plan fiduciary reasonably believes have effective access, including e-mail, text messages, and continuous-access websites (for example, an intranet site).

On April 10, 2023, President Biden signed House Joint Resolution 7, which immediately ended the COVID-19 national emergency on that date—about a month before the administration had planned. After some initial confusion, the DOL informally indicated that it still plans to end the outbreak period on July 10—notwithstanding the earlier end to the emergency.

Therefore, on July 10, 2023, the “clocks” will resume running normally for qualified beneficiaries to elect and pay for COBRA coverage, as well as to notify the plan administrator of certain qualifying events (see above).

The DOL, HHS, and Treasury issued guidance to illustrate how some of these time frames will operate. Inevitably, though, tricky situations will emerge when applying the prior tolling rules. And given that the 1-year tolling period applies on an individual basis, the deadlines for qualified beneficiaries to make COBRA elections, payments, and notices will not be uniform, even as the outbreak period ends.

Plan administrators should review prior communications sent to qualified beneficiaries regarding the tolling of COBRA election and premium payment periods and provide updated communications to the extent necessary. Administrative processes should also be reviewed and adjusted to account for the end of the tolling requirement to avoid unintentionally extending COBRA deadlines beyond the end of the COVID-19 emergency.

Taking Family and Medical Leave Act (FMLA) leave is not always a qualifying event that sets off COBRA's notice requirements (26 CFR Sec. 54.4980B-10). A qualifying event occurs only if three conditions are met:

If all three conditions are met, a qualifying event occurs on the last day of FMLA leave. The maximum COBRA coverage period is generally measured from the date of this qualifying event. If coverage would be lost on a later date, the maximum coverage period would be measured from that date.

The IRS also states that:

COBRA requires that if a plan makes conversion options available to any participants, it must offer a qualified beneficiary the option to enroll under an individual health plan at the end of the applicable 18- or 36-month continuation period. The insured must pay the entire premium at the applicable individual rate, which may be more expensive.