Important: What you need to know about COBRA to keep your clients compliant!

A lot can be said in our industry right now on Affordable Care Act (ACA) “repeal and replace,” especially as the Trump administration continues to focus on the new 2017 American Health Care Act (AHCA). As brokers, we hear many things from our clients about the current health care climate and all the changes we might see coming our way. Of course, we know the ACA continues to be the law of the land – at least for now – and continues to be enforced. We are challenged to be in-the-know and up-to-date on current events surrounding the ACA/AHCA.

It’s easy, though, to lose focus on other aspects of compliance, which carry just as much importance as the ACA and its corresponding current events. There are many things we know to be certain today. COBRA law, for starters, has largely remained unchanged since the 1980s. COBRA is enforced by the Internal Revenue Service (IRS), Department of Labor (DOL), and U.S. Department of Health & Human Services (HHS), and compliance with COBRA law is equally as important as compliance with the ACA.

So, what do you need to know about COBRA law? This article briefly recaps a high-level overview of federal COBRA law, and tells you what you need to know to keep your clients in compliance.

What is Federal COBRA?

COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1985, is a federal law that requires an employer sponsoring group health coverage to offer the opportunity for a covered individual to continue coverage on the group plan following the loss of coverage due to a qualifying event, such as a termination of employment, reduction of hours, loss of dependent status, etc.

The option to continue group coverage must be extended to covered employees, former employees, spouses, former spouses, and dependent children when coverage would otherwise be lost due to certain qualifying events.

Applicable group rates apply to COBRA participants. The premium charged cannot exceed the full cost of coverage plus a 2% administrative charge, or 102% total. Federal COBRA beneficiaries can continue coverage for up to 18 months.

Who Is Subject to Federal COBRA?

Generally, an employer sponsoring a group health plan, including voluntary plan(s), is subject to COBRA. Employer groups with 20 or more full time + full time equivalents (FTE) for 50% or more of the typical business days in the preceding calendar year are subject to federal COBRA. This determination should be made by groups on January 1st of each year, and does not change throughout the calendar year once the determination has been made.

California also has a second COBRA law, Cal-COBRA, which provides similar mandates for groups with 2-19 FT + FTE counts. Cal-COBRA allows California residents to continue COBRA for an additional 18 months upon exhaustion of federal COBRA. Or, if the group is not subject to federal COBRA, Cal-COBRA allows covered individuals to continue coverage upon experiencing a Qualifying Event (QE), just like the federal COBRA law. Cal-COBRA is generally administered by the carrier, and can include up to an additional 10% administration charge. That means, 110% of the applicable group premium can be charged to a Cal-COBRA participant.

Reference Word & Brown’s “Group Count” resource to show you how to count the size of your employer-clients’ groups under COBRA law, the ACA, and to make a determination on Medicare primary/secondary payer.

The only types of groups not subject to COBRA are churches and the federal government.

What Plans Are Subject to COBRA?

Any plan maintained by the employer to provide health care benefits to employees, former employees, spouses, or dependents is subject to COBRA. These plans can be: Medical, Dental, Vision, Prescription Drug, Health FSAs, Health Reimbursement Arrangements (HRAs), certain Employee Assistance Programs (EAPs), Wellness programs, Cancer policies, etc.

COBRA does not apply to Health Savings Accounts (HSAs), Long-Term Care (LTC), Life Insurance, and Disability plans. COBRA does, however, apply to the HSA-eligible High Deductible Health Plans (HDHPs) that HSA participants must have in order to contribute to an HSA bank account.

Qualifying Events

Qualifying Events that can impact an employee, spouse, and dependents include a termination of employment, either voluntary or involuntary, or a reduction of hours that makes the employee ineligible for benefits.

Qualifying Events that impact spouses and dependents only are events such as divorce/legal separation from the employee, loss of dependent-child status, death of covered employee/retiree, employee entitlement to Medicare (if it results in a loss of coverage), etc.

COBRA must be offered to any qualified beneficiary experiencing a loss of coverage due to one of these qualifying events.


Federal law requires employers subject to COBRA to distribute an initial general rights notice to all covered employees and dependents within 90 days of enrolling in coverage on a group plan, or when a company first becomes subject to COBRA. This notice informs covered individuals of their continuation rights under COBRA upon the future occurrence of a qualifying event. It gives covered individuals basic information about COBRA, informs the employee (and spouse, when applicable) of the responsibility to notify the employer of a qualifying event (such as divorce/legal separation), and provides details about the responsibilities, rights, and obligations of the covered individual(s) under COBRA.

Once a covered individual experiences a qualifying event that results in loss of coverage, an election notice must be generated and sent to the impacted individuals (beneficiaries). This allows the beneficiaries to elect the continuation of coverage. It must list the type of Qualifying Event, the date of such event, loss of coverage date, election period, type(s) of coverage, premium amount(s), due date of premium, separate election rights for each qualified beneficiary, beginning/end of continued-coverage period, and contact information for the plan administrator.

COBRA Timelines

A critical part of COBRA compliance is adherence to pre-set COBRA timeframes:

  • 30 Days – The employer has 30 days to notify the plan administrator (TPA, such as WageWorks) that there has been a qualifying event.
  • 14 Days – The plan administrator (or employer, if no plan administrator) has 14 days to send out the election notice.
  • 60 Days – The qualified beneficiary has 60 days to elect COBRA coverage.
  • 45 Days – Once COBRA is elected, the qualified beneficiary has 45 days to make the first payment of COBRA premium.
  • 30 Days – COBRA participants must be given a 30-day grace period to make monthly payments for COBRA coverage.

Other Considerations

Many employers, especially those with Medical cases written through Word & Brown, use a third party administrator (TPA) to administer COBRA. Most employers would rather outsource COBRA compliance to a TPA like WageWorks to take the burden of administration off of the employer.

It’s important to remember, however, that the TPA can only act if the employer keeps the TPA aware of changes in enrollment/qualifying events. A TPA will send out notices as required by law, but notices can only be sent by the TPA if the employer notifies the TPA of a new employee coming onto the plan, a qualifying event, etc.

Groups with 20 or more medically enrolled employees get complimentary federal COBRA administration services through WageWorks. We at Word & Brown know COBRA compliance is challenging, though critical, and we are proud to extend this service to you and your groups because of our partnership.

There are many more complexities to consider with COBRA. This article details just a small portion of COBRA compliance, though it gives you a general reminder of COBRA law and the bulk of the major requirements. Rely on your WBCompliance team to help you with all of your situational COBRA questions, and any other compliance questions impacting you and your employer groups.

You can reach your WBCompliance Team by telephone at 866-375-2039 or via email at We are here to support you (and your clients’) compliance-related questions.

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