2026 Newfront COBRA for Employers Guide
COBRA for Employers
2026 Edition
Audio
Presented by: Brian Gilmore | Lead Benefits Counsel, VP
Guide Topics
Continuation Coverage in a Nutshell
The Basics, and the Tricky Situations All Employers Must Address
- COBRA = Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA)
- Group health plans must offer continuation coverage to employees and certain dependents
- The basics are straightforward, but the nuances can be quite complex
- Large potential liabilities make correcting mistakes a top priority
COBRA Continuation Coverage
Topics for Discussion:
- Qualifying Events: When employees and their dependents are eligible for COBRA
- Elections and Payment: Timely election and payment rules for COBRA qualified beneficiaries
- Coverage Options: The plan options available to qualified beneficiaries, and the exceptions that apply
- COBRA Subsidies: Navigating the rules for employer COBRA subsidies
Which Employers are Subject to COBRA?
General Rule:
Employers Are Subject to COBRA Unless an Exception Applies
COBRA generally applies to all employer-sponsored group health plans through:
- ERISA
- Internal Revenue Code (IRC);
- Public Health Service Act (PHSA)
Designed as a sweeping coverage rule to reach virtually all employers with a health plan unless an exception applies.
Federal COBRA 20-Employee Threshold:
Federal COBRA does not apply to an employer with:
- Fewer than 20 employees (including fractional part-time employees) in the preceding calendar year.
Special Rules: State Governmental Employers
- The ERISA and Internal Revenue Code COBRA rules do not apply to a plan sponsored by a governmental entity.
- Public Health Service Act (PHSA) COBRA rules still apply.
Special Rules: Federal Government
- COBRA does not apply to the Federal Employees Health Benefits (FEHB) plan.
- Continuation coverage is instead governed by the Federal Employees Health Benefits Amendments Act (FEHBA). Generally the same rules as COBRA with small differences.
Special Rules: Church Plans
- COBRA does not apply to a plan sponsored by a church or by a convention or association of churches that is tax-exempt.
- Generally includes church-affiliated hospitals.
Qualifying Events
Which Events Trigger COBRA Rights?
COBRA Applies to Group Health Plans
The COBRA rules apply to employer-sponsored group health plans. This generally refers to any employer plan that provides medical care under the IRC §213(d) definition.
- Medical
- Dental
- Vision
- Health FSA
- HRA (including specialty HRAs, SIHRAs, and ICHRAs)
- EAP (if not limited to referral only)
- Wellness Program (if provides medical benefits)
NOT Subject to COBRA: Non-Group Health Plans
- Disability (STD/LTD)
- AD&D
- HSA
- Group Term Life
- Fixed Indemnity
- Long-Term Care
- Dependent Care FSA
- Lifestyle Spending Account (LSA)
- Pet Insurance
Triggering Events
Two Requirements for a COBRA Qualifying Event
Duration of COBRA by Triggering Event
18-Month COBRA Maximum Coverage Period
- Termination of employment
- Reduction of hours
29-Month COBRA Maximum Coverage Period
- Divorce or legal separation from employee
- Disability extension
36-Month COBRA Maximum Coverage Period
- Death of employee
Early Loss of COBRA
Employers or their COBRA TPA must provide a notice of COBRA termination to the qualified beneficiary whenever coverage ends before the maximum coverage period.
The Notices of Unavailability and Terminations of Coverage
- Applies Where: Plan denies a request for continuation coverage by individuals not entitled to COBRA or not entitled to a requested extension.
- Who Must Receive: Any individual denied a request for COBRA continuation.
- Content: The reason COBRA is terminating early, the date of termination, and any rights to other alternative coverage (e.g., Exchange).
- Deadline to Provide: As soon as practicable following determination of termination.
Disability Extension
Conditions for Disability Extension to 29 Months
| The Disability extension from 18 to 29 months is available where: | Interaction with State Mini-COBRA |
|---|---|
| The COBRA qualifying event is the employee's termination of employment or reduction in hours; | Some states offer state mini-COBRA extensions that may be more advantageous than the disability extension |
| The qualified beneficiary is determined by the Social Security Administration (SSA) to have been disabled at any time during the first 60 days of COBRA coverage; | Example: Cal-COBRA Extension |
| The qualified beneficiary notifies the plan within 60 days of the SSA disability determination; and | Cal-COBRA provides an extension to 36 months for fully insured major medical plans sitused in California |
| The qualified beneficiary notifies the plan of the SSA disability determination before the end of the 18-month standard maximum coverage period. | Generally, Cal-COBRA is a better option than the federal disability extension |
COBRA Disability Extension Premium
- The COBRA premium can increase from 102% to 150% for the period of the disability extension (months 19-29) because disabled former employees are likely to cause a greater expense to the plan.
- Cal-COBRA premiums are less expensive than the federal disability extension and apply only to major medical coverage.
Unusual Gaps in Coverage: Two Exceptions
COBRA Generally Provides Continuous, Seamless Coverage. There are exceptions where COBRA can include a gap in coverage between the period of active coverage and the COBRA continuation coverage.
Unusual Gaps in Coverage: Two Exceptions
Exception 1: Removal of Spouse in Anticipation of Divorce/Legal Separation
- Employees who remove their spouse in anticipation of divorce must notify the plan upon finalization for COBRA coverage.
Exception 2: Failure to Return from FMLA Leave (After Failure to Timely Pay)
- If an employee on FMLA leave fails to return to work when the protected leave period ends, health coverage will generally terminate as of the end of the last day of the protected leave.
- That loss of coverage caused by failure to return from FMLA leave is a qualifying event for the employee and covered dependents.
Divorce vs. Legal Separation
Plan Terminates Coverage Upon:
- Legal Separation or Divorce
Late Notice of Divorce/Legal Separation
- A former spouse is not eligible for the plan and must be removed whenever the plan receives notice.
Gross Misconduct Exception
- Courts have interpreted the gross misconduct exception to apply in very limited circumstances.
Elections and Payment
How QBs Access COBRA
COBRA imposes two primary notice requirements on employers. The initial COBRA notice is sent upon enrollment, and the COBRA election notice is sent upon a qualifying event.
Required Employer Notices
| COBRA Initial Notice | COBRA Election Notice |
|---|---|
| Required to go to covered employees and their covered spouse within 90 days of enrollment in the plan | Election Notice to Qualified Beneficiary: 44 days from loss of coverage |
| No requirement to provide to children | 30 days from employer to plan administrator |
Required Notice From Employees/Dependents
- Must notify the Plan Administrator of qualifying events within 60 days.
- Failure to provide timely notice can cause the employee or dependent to lose their COBRA rights under the plan.
The COBRA Premium
Qualified Beneficiaries Pay the Full Cost of Coverage (Unless Employer Subsidizes).
The Grace Period and Shortfalls
| The Initial Premium Payment (45 Days) | Ongoing Monthly Payments (30-Day Grace Period) |
|---|---|
| Due within 45 days of the COBRA election | Due within 30 days after the monthly premium due date |
COBRA Election/Payment Exception
- Employers should consult with carriers regarding late COBRA election or premium payment requests.
Failure to Timely Provide Election Notice
Employers that discover a failure to timely provide a COBRA election notice will always want to correct that error quickly to avoid significant tax and lawsuit liabilities.
COBRA M&A Qualified Beneficiaries—Stock Deal
General Rule
If the selling group ceases to provide any group health plan to any employee (and the termination of the seller's plan was in connection with the sale), the buyer’s group health plan is liable for the COBRA coverage.
Buyer’s Obligation to Offer COBRA if Seller Terminates Plan: Stock Deal
Buyer’s obligation applies to all M&A qualified beneficiaries with respect to that stock sale.
COBRA Second Qualifying Events
Extends Maximum Coverage Period for Spouse and Dependents.
COBRA and Medicare
Medicare Enrollment Must Occur Prior to Qualifying Event (QE)
COBRA and Domestic Partners Not Qualified Beneficiaries
Wrap-up
Takeaways
COBRA Continuation Coverage Top Five Issues for Employees.
The content above serves solely as a guide and is not legal advice. For specific inquiries, please consult an attorney or a benefits specialist.