Definition
COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that requires employers with 20 or more employees to offer qualified beneficiaries — employees and their dependents — the option to continue group health plan coverage for a defined period following a qualifying event, such as termination of employment, reduction in hours, divorce, or a dependent aging off the plan. COBRA participants pay the full cost of coverage — both the employee and employer share — plus a 2% administrative fee. Coverage periods range from 18 to 36 months depending on the qualifying event.
What This Means for Employers
COBRA compliance carries significant administrative and legal weight. Employers must send required notices within strict timeframes — typically within 14 days of notification of a qualifying event — and failure to do so creates substantial liability exposure. For self-funded employers, COBRA participants can represent a meaningful claims risk because they tend to be higher utilizers (they are often electing coverage precisely because they anticipate needing care). Some employers use COBRA administration vendors to manage the notification and premium collection process, which reduces compliance risk and administrative burden.
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