COBRA Continuation Coverage

COBRA — the Consolidated Omnibus Budget Reconciliation Act — requires private-sector employers with 20 or more employees and most state and local governments to offer continuation of group health plan coverage when a qualifying event would otherwise cause a loss of coverage. Qualifying events include voluntary or involuntary termination of employment, reduction in hours, divorce or legal separation, death of the covered employee, and a dependent child losing dependent status. COBRA coverage is typically identical to what the employee had before the qualifying event, but the cost shifts almost entirely to the individual: the employer is permitted to charge up to 102% of the full premium (the employee share plus the employer share plus a 2% administrative fee). Coverage generally lasts 18 months for termination or hours reduction, and up to 36 months for other qualifying events.

Why it matters for HR and benefits teams

COBRA administration carries significant compliance risk. Employers must send specific notices within strict IRS and DOL timeframes — including a general notice when an employee enrolls in the plan and a qualifying event notice within 14 to 44 days of the qualifying event depending on who provides the notice. Failure to comply can expose the employer to excise taxes of $100 per day per qualified beneficiary, as well as DOL civil penalties. For HR teams managing ongoing offboarding, tracking COBRA notices, election deadlines, and premium payments is operationally intensive. Most employers outsource COBRA administration to a third-party administrator, but HR still owns the obligation to notify the TPA of qualifying events promptly, typically within 30 days of the event.

How it works

1. A qualifying event occurs — most commonly an employee termination, voluntary resignation, or reduction in hours below the benefits eligibility threshold.
2. The employer notifies the plan administrator of the qualifying event within 30 days (for employer-initiated events) or 60 days (for employee-initiated events such as divorce).
3. The plan administrator sends a COBRA election notice to the qualified beneficiaries within 14 days of receiving notification.
4. Qualified beneficiaries have 60 days from the date of the notice (or coverage loss, whichever is later) to elect COBRA continuation.
5. Once elected, the beneficiary has 45 days to make the first premium payment covering the retroactive period.
6. Coverage is maintained as long as monthly premiums are paid on time; the TPA or employer bills the individual directly.
7. Coverage terminates at the end of the maximum continuation period, upon failure to pay premiums, or when the individual becomes eligible for other group health coverage.

How benefits administration software supports COBRA Continuation Coverage

Benefits administration platforms reduce COBRA compliance risk by automatically triggering COBRA workflows when a qualifying event is recorded in the system. When an employee's status changes to terminated or their hours drop below the eligibility threshold, the platform can alert the COBRA TPA via integration, log the notification date, and track the election window deadline. This automation replaces error-prone manual tracking and reduces the risk of missed notice deadlines.

• Qualifying event detection — Monitors employee status, hours, and eligibility changes to identify COBRA-triggering events automatically.
• TPA notification integration — Sends qualifying event data to the COBRA third-party administrator via API or file feed, eliminating manual notification steps.
• Notice deadline tracking — Records the date the qualifying event was reported and surfaces deadline alerts for election notices and premium payments.
• Offboarding workflow integration — Embeds COBRA notification steps within the employee offboarding checklist so HR is prompted to confirm event reporting.
• Coverage termination coordination — Sends termination enrollment files to carriers on the correct effective date, preventing coverage continuation beyond the election window.
• Audit trail logging — Maintains a timestamped record of all COBRA-related actions, notices sent, and elections received for compliance documentation.

Related terms

• Open Enrollment — The annual window for benefits elections; COBRA elections occur outside this window as triggered by qualifying events.
• Employee Lifecycle — The full arc of an employee's tenure from hire to offboarding, with COBRA obligations arising at the termination stage.
• Offboarding — The HR process of managing an employee's departure, during which COBRA notification obligations must be met within regulatory deadlines.
• Qualifying Life Event — A change in circumstances that triggers special enrollment rights or, in the COBRA context, loss of coverage that initiates a COBRA election window.
• HR Compliance — The practice of meeting federal and state employment law obligations, including COBRA notice and election requirements under ERISA and the DOL.