August 6, 202617 min readBenefits compliance

What Is COBRA and What Does It Actually Require of Employers?

An employee gives two weeks' notice. A long-tenured staff member is let go. Someone's hours get cut and they lose their benefits eligibility. In each of these situations, employers subject to federal COBRA are required to offer that person the option to keep their health coverage, at their own expense, for a defined period of time. That requirement comes from COBRA, the Consolidated Omnibus Budget Reconciliation Act, passed by Congress in 1985 and signed into law in April 1986.

Most employers know the name. Fewer have a clear picture of exactly who it applies to, what it requires, and what happens when the process breaks down. This issue covers both sides: what employers must do and what employees are entitled to.

What COBRA is and who it covers

COBRA requires certain employers to offer employees and their families the option to continue group health coverage after a qualifying event would otherwise end that coverage. It applies to group health plans: arrangements an employer maintains to provide medical care, whether through insurance, an HMO, or other means. This generally includes medical, dental, and vision coverage. Flexible spending accounts may also be subject to COBRA in some circumstances, depending on how the plan is structured; employers with FSA offerings should confirm applicability with their plan administrator.

The employer threshold

COBRA applies to private-sector group health plans maintained by employers with 20 or more employees on more than 50% of typical business days in the prior calendar year. In plain terms: if you had 20 or more employees for most of the prior year, COBRA applies to your plan. It also applies to state and local government plans.

Both full-time and part-time employees count toward the 20-employee threshold. Part-time employees are counted as a fraction, calculated by dividing their hours worked by the hours required for full-time employment at that employer. For example, if full-time at your company means 40 hours per week, an employee working 20 hours per week counts as 0.5 toward the threshold.

Federal government plans and plans sponsored by churches and certain church-related organizations are exempt from COBRA.

Florida employers and the small employer threshold

Florida does have a mini-COBRA law: the Florida Health Insurance Coverage Continuation Act, codified at Florida Statutes Section 627.6692. It requires insured group health plans issued to employers with fewer than 20 employees to offer continuation coverage similar to federal COBRA.

Florida's mini-COBRA runs on its own notice and election timeline, and it does not mirror the federal sequence. A qualified beneficiary must give the insurance carrier written notice of the qualifying event within 63 days of the event. The carrier then has 14 days from receiving that notice to send an election and premium notice by certified mail. From there, the beneficiary has 30 days after receiving the carrier's notice to elect coverage and pay the initial premium. Subsequent premiums are billed monthly, with a 30-day grace period for payment.

Coverage runs up to 18 months. It can extend to 29 months if a qualified beneficiary is disabled at the time of the qualifying event: the beneficiary must report the Social Security Administration's disability determination to the carrier within 60 days of that determination and before the original 18-month period ends. During the 11-month extension, the carrier may charge up to 150% of the group rate; the standard cap otherwise is 115%, higher than federal COBRA's 102%. Florida's mini-COBRA applies only to fully insured plans; self-funded plans are not covered by the state law and remain governed exclusively by federal COBRA where the federal threshold is met.

Florida is one of roughly 40 states that have enacted their own mini-COBRA laws extending continuation coverage to small employers below the federal threshold. These state laws vary considerably: employer size thresholds range from as few as 2 employees to 19, coverage durations range from 3 months to 36 months, and some states impose requirements on employers of all sizes, not just those below the federal threshold. Most state mini-COBRA laws apply only to fully insured plans; self-funded plans are generally preempted by ERISA.

For Florida employers with fewer than 20 employees on a fully insured plan, the state mini-COBRA rules above are the operative requirement, not a nonissue. For Florida employers with 20 or more employees, federal COBRA governs and the state law does not add a separate layer. For employers operating in multiple states, each state where employees are enrolled in group health coverage needs to be reviewed separately, since mini-COBRA rules vary considerably from state to state in employer size thresholds, coverage duration, and premium caps.

Who qualifies as a beneficiary

Qualified beneficiaries are individuals covered by the group health plan on the day before the qualifying event. This includes:

The covered employee
The employee's spouse or former spouse
The employee's dependent children
In certain cases: retired employees, agents, independent contractors, and directors covered under the plan, and any child born to or placed for adoption with a covered employee during the COBRA coverage period

Qualifying events

A qualifying event is a specific circumstance that causes a covered individual to lose group health coverage. The type of qualifying event determines who is eligible for continuation coverage and how long that coverage must be offered.

For the covered employee

Termination of employment for any reason other than gross misconduct
Reduction in hours of employment that causes loss of coverage

Gross misconduct is not defined in the statute. Whether a termination qualifies as gross misconduct is determined on a case-by-case basis by courts. As a practical matter, employers should not assume that a for-cause termination automatically disqualifies an employee from COBRA eligibility. When in doubt, treat gross misconduct denials cautiously and confirm with your plan administrator or attorney before acting on one.

For the spouse and dependent children

Termination of the covered employee's employment for any reason other than gross misconduct
Reduction in the covered employee's work hours
Death of the covered employee
Divorce or legal separation from the covered employee
The covered employee becomes entitled to Medicare
Loss of dependent child status under the plan's rules (for children aging out at 26 under the Affordable Care Act)

The FMLA intersection

FMLA leave is not a qualifying event under COBRA. An employee on approved FMLA leave retains their health coverage under the same terms as active employees. A qualifying event can occur, however, when an employer's obligation to maintain health benefits under FMLA ends, for example when an employee on FMLA leave notifies the employer that they do not intend to return to work.

Notice obligations

The following sections describe federal COBRA requirements for covered private-sector group health plans. Florida continuation coverage follows the separate notice and election procedures summarized above.

COBRA compliance is largely a notice compliance exercise. There are multiple required notices, each with its own trigger and deadline. Missing any one of them creates liability.

Throughout this section, references to "the plan" or "the plan administrator" mean whoever is legally responsible for administering your group health benefits. For many small employers, that is the employer itself. For others, it is a third-party benefits administrator or insurance carrier, though performing COBRA tasks on an employer's behalf does not by itself make a vendor the legal plan administrator. Either way, the employer is ultimately responsible for COBRA compliance, even when day-to-day administration is outsourced.

The general notice

The plan administrator must provide a general notice describing COBRA rights to each covered employee and covered spouse, generally within 90 days of the employee or spouse first becoming covered under the plan. This is typically satisfied through the plan's Summary Plan Description, but furnishing the SPD to the employee alone does not automatically establish proper notice to the spouse; the SPD (or another qualifying notice) has to actually reach the spouse too, though a single notice addressed to both members of the same household is permitted.

The qualifying event notice

When a qualifying event occurs, either the employer or the employee or their family member must notify the plan, depending on the type of event.

The employer must notify the plan administrator within 30 days after:

Termination or reduction in hours of the covered employee
Death of the covered employee
The covered employee becoming entitled to Medicare

That 30-day employer notice, followed by a 14-day election notice, is the general sequence. It is not the only one. Where the employer is also the legal plan administrator, a separate rule generally applies instead: the election notice is due not later than 44 days after the qualifying event (or after the loss of coverage, depending on how the plan is structured), rather than running a 30-day notice period and a 14-day election notice period back to back. Multiemployer plans follow their own timing rules under the plan's terms. Which timeline actually governs depends on who is legally the plan administrator for that plan.

For divorce, legal separation, or a dependent child losing coverage under the plan's rules, the employee or qualified beneficiary is responsible for giving notice to the plan. The plan must allow at least 60 days for that notice, and the 60-day period cannot end before 60 days after the latest of: the date of the qualifying event, the date the beneficiary actually loses coverage because of it, or the date the beneficiary is informed, through the SPD or the general notice, of both the responsibility to provide notice and the plan's procedure for doing so. A plan may allow more than 60 days; it cannot allow less.

The election notice

After receiving notice of a qualifying event, the plan generally must provide an election notice to each qualified beneficiary within 14 days, except in the employer-as-administrator and multiemployer-plan situations described above, where a different deadline applies. The election notice describes the right to elect continuation coverage, the cost, the election deadline, and the coverage period. The Department of Labor provides a model election notice that satisfies this requirement when properly completed.

The election period

Qualified beneficiaries must be given at least 60 days to elect continuation coverage. The 60-day period begins on the later of the date the election notice is provided or the date coverage would otherwise be lost. Each qualified beneficiary has an independent right to elect COBRA; a spouse or dependent child does not have to make the same election as the covered employee.

When coverage or an extension is denied

Sometimes a plan receives a qualifying-event notice, a disability notice, or a second-qualifying-event notice and determines that continuation coverage, or an extension of it, is not actually available. In that situation, the administrator has to send the individual a notice of unavailability explaining why, within the same general timeframe that would otherwise apply to an election notice. Silence, or simply not enrolling the person, is not a substitute for that notice.

What COBRA coverage looks like

Coverage must mirror active employee coverage

Continuation coverage must be identical to the coverage offered to similarly situated active employees. Any changes made to the plan for active employees also apply to COBRA participants. Qualified beneficiaries also have the same open enrollment rights as active employees.

Who pays for it

Qualified beneficiaries are responsible for paying their own COBRA premiums. The usual maximum a plan can charge is 102% of the applicable premium: the full cost of coverage, including both the employee's former contribution and the employer's contribution, with the permitted 2% administrative charge already built into that 102%, not added on top of it. For example, if the underlying applicable premium is $1,000, the maximum a plan can charge is $1,020, not $1,000 plus a separate 2% fee.

Qualified beneficiaries do not have to pay at the time they elect COBRA. The plan must allow at least 45 days after the election for the first premium payment. After that, subsequent payments are due on a monthly basis, with a minimum 30-day grace period for each. The plan is not required to send monthly premium reminders, so the beneficiary is responsible for tracking their own payment schedule.

Employers may choose to cover some or all of the COBRA premium, which is sometimes offered as part of a severance arrangement. A third party, such as a family member, may also pay premiums on behalf of a qualified beneficiary.

For a qualified beneficiary who qualifies for the disability extension, the plan may charge up to 150% of the premium during the additional coverage period, but only for coverage that includes the disabled beneficiary. If only nondisabled family members continue coverage during that period, the ordinary 102% cap still applies.

How long it lasts

The standard maximum coverage period is 18 months for qualifying events involving termination of employment or reduction in hours. For most other qualifying events, including divorce, death of the covered employee, and loss of dependent child status, coverage can extend to 36 months. Medicare entitlement and certain retiree situations, including employer bankruptcy, are exceptions with their own rules, and the maximum period for a spouse or dependent can run differently than the general 36-month figure depending on the timing involved. These situations are fact-specific enough that they are worth confirming with the plan administrator or counsel rather than assuming the general rule applies.

Two provisions can extend coverage beyond 18 months:

Disability extension: if the Social Security Administration determines that a qualified beneficiary was disabled at any time during the first 60 days of COBRA coverage, all qualified beneficiaries in that family may extend coverage for an additional 11 months, for a total of 29 months, provided the beneficiary gives the plan timely notice of the SSA determination before the original 18-month period ends. The plan may charge up to 150% of the premium during the extension for coverage that includes the disabled beneficiary, as described above.
Second qualifying event: if a second qualifying event occurs while a beneficiary is on COBRA, including during the 11-month disability extension and not only within the original 18 months, and that event would independently have caused a loss of coverage, the coverage period may extend to a total of 36 months measured from the original qualifying event.

When COBRA coverage can end early

COBRA coverage may be terminated before the end of the maximum coverage period if:

The qualified beneficiary fails to pay premiums on time
The employer ceases to maintain any group health plan
The qualified beneficiary becomes covered under another group health plan after electing COBRA
The qualified beneficiary becomes entitled to Medicare after electing COBRA
The qualified beneficiary engages in fraud or misconduct that would result in termination for an active employee

When coverage ends early, the plan must provide the qualified beneficiary with a notice of early termination as soon as practicable. The notice must include the date coverage will end, the reason for termination, and any rights to elect alternative coverage.

Enforcement and penalties

COBRA compliance is administered by multiple agencies depending on the type of plan. The Department of Labor's Employee Benefits Security Administration has lead authority over private-sector plans with respect to disclosure and notification requirements. The IRS oversees excise tax provisions. The Department of Health and Human Services administers continuation coverage requirements for state and local government plans.

Employers who fail to comply with COBRA notice requirements face exposure from multiple directions:

A court can hold the plan administrator personally liable for up to $110 per day, per affected beneficiary, for failing to provide a required COBRA notice. This is not a fine the DOL issues on its own; it is a remedy under ERISA that a court awards at its discretion in a civil suit brought by the affected beneficiary.
The IRS can impose an excise tax of $100 per day for each affected qualified beneficiary, capped at a combined $200 per day when more than one qualified beneficiary from the same qualifying event is affected. That $200 is a shared family cap, not an additional $200 charged for each extra person.
Employees who do not receive required notices may pursue civil action under ERISA.

COBRA compliance is not a back-burner item. A missed election notice, a miscounted notice window, or the wrong assumption about which timeline applies can generate per-day exposure that accumulates quickly, and the employer is responsible regardless of whether the plan is administered in-house or by a third-party administrator.

Putting it together

For most employers, the practical COBRA compliance checklist splits into two tracks.

Federal COBRA checklist

Is the employer covered by federal COBRA? Confirm the 20-employee threshold against the prior calendar year's headcount, counting part-time employees as fractions.
Has the legal plan administrator been identified, and is the election notice being delivered within the deadline that actually applies: generally 14 days after notice, but 44 days after the event where the employer is also the administrator, with separate rules for multiemployer plans?
Is the beneficiary notice window for divorce, legal separation, and dependent-status changes being measured from the latest of the event, the loss of coverage, or the date the beneficiary was informed of the notice responsibility, not just a flat count from the event date?
When continuation coverage or an extension is denied following a beneficiary's notice, is the required notice of unavailability being provided within the applicable deadline?
Is the premium being calculated correctly? The usual maximum is 102% of the applicable premium, a figure that already includes the 2% administrative charge rather than adding it on top.
Are early termination notices being issued when COBRA coverage ends before the maximum period?

Florida mini-COBRA checklist

If the employer falls under 20 employees on a fully insured plan, does Florida's mini-COBRA law apply? Confirm the coverage duration (18 months, or 29 with a disability extension), the premium cap (115% generally, 150% during the disability extension), and the 63-day beneficiary notice, 14-day insurer response, and 30-day election windows under Florida Statutes Section 627.6692.
Does the employer operate in multiple states? If so, each state where employees are enrolled in group health coverage needs to be reviewed against that state's own mini-COBRA requirements, since roughly 40 states have continuation-coverage laws for small employers, each with its own thresholds, durations, and premium terms.

COBRA is one of those compliance areas where the process matters as much as the substance. The coverage itself is straightforward. It is the notice deadlines, the beneficiary-by-beneficiary tracking, and the premium calculations, federal and Florida alike, that tend to create problems in practice.

For employees navigating a qualifying event, the Department of Labor's Worker's Guide to Health Benefits Under COBRA is the clearest plain-language resource available. The link is in the references section below. Employers fielding questions from departing employees can point them there directly.

This post is general HR and compliance information, not legal advice. Requirements vary based on employer size, plan structure, and circumstances. Consult qualified legal counsel or a licensed benefits administrator for plan-specific guidance.

References

COBRA: federal law and employer obligations

Florida mini-COBRA

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