That first COBRA bill often comes as a shock to former employees. Why is it so expensive? It’s a common question, and the answer lies in a simple misunderstanding. COBRA isn’t a new government plan or a different type of insurance. It’s a federal law that allows an employee to continue the exact same group health plan they had with your company—but now they foot the entire bill. This guide cuts through the confusion surrounding cobra health insurance. We’ll separate fact from fiction so you can manage your responsibilities and guide your team with accurate information.

Key Takeaways

• Keep the Same Plan and Doctors: COBRA’s main advantage is allowing former employees to continue their existing health plan without interruption, which is a critical option for anyone managing ongoing medical care or wanting to keep their trusted physicians.
• Prepare Employees for the High Cost: The biggest drawback is the price, as the individual must cover the full premium plus an administrative fee. Always point them toward exploring alternatives like the Washington Healthplanfinder, which may offer more affordable coverage.
• Fulfill Your Duty, Then Offload the Work: Your legal responsibility is to provide timely COBRA notifications. To ensure compliance and a smooth process, partner with a benefits broker who can manage the complex administration and answer employee questions for you.

What is COBRA Health Insurance?

If you’ve ever managed an employee’s departure, you’ve likely come across the term COBRA. It sounds complicated, but the concept is pretty straightforward. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, a federal law that gives employees and their families the option to keep their group health insurance for a limited time after a job loss or other qualifying event. Think of it as a temporary bridge that prevents a sudden gap in health coverage during a major life transition. As an employer, understanding the basics is key to guiding your team through these changes smoothly and ensuring your company stays compliant.

The Consolidated Omnibus Budget Reconciliation Act of 1986

COBRA is a federal law from 1986 that gives employees the right to continue their group health coverage after leaving their job. The main benefit is continuity; they can keep the exact same plan, which means keeping their doctors and any ongoing treatments without interruption. This can be a huge relief during a stressful transition. However, the cost is often a major shock. Under COBRA, the individual is responsible for paying the entire premium—both their share and the portion your company used to cover—plus a small administrative fee. This is why the price seems so high compared to what they paid as an employee. Coverage typically lasts for 18 months, though it can extend up to 36 months for dependents in certain situations. As an employer, your primary duty is to notify eligible employees in a timely manner, but managing the ongoing administration can be a hassle. This is where partnering with an expert can lift a significant burden off your plate, ensuring compliance and a smooth process for everyone involved.

How COBRA Protects Your Health Coverage

The main purpose of COBRA is to provide a safety net. When an employee loses their job, gets divorced, or experiences another significant life event that would normally cause them to lose their health benefits, COBRA steps in. It grants them the right to choose to continue their existing group health plan for a set period. This ensures that they and their families can maintain access to the same doctors, prescriptions, and medical services without interruption. The law, officially the Consolidated Omnibus Budget Reconciliation Act, was designed to offer peace of mind during what can often be a stressful and uncertain time, giving people a chance to find new coverage without risking their health.

How Does COBRA Actually Work?

COBRA generally applies to private-sector companies with 20 or more employees. It’s triggered by specific situations known as “qualifying life events.” For an employee, this could mean leaving a job—whether voluntarily or involuntarily—or having their work hours reduced to the point where they no longer qualify for benefits. For their spouse or dependent children, qualifying events can also include the employee’s death, divorce or legal separation, or a dependent child aging out of the plan. When one of these events occurs, the employee or their family member has the option to elect COBRA and continue the exact same health plan they were on before. It’s a crucial process, and our team can help you get started with managing these transitions.

COBRA Myths You Shouldn’t Believe

There’s a lot of confusion around COBRA, so let’s clear a few things up. First, COBRA isn’t a new health insurance plan; it’s simply a law that lets you continue the one you already had through your employer. Second, many people are surprised to learn that it isn’t free or subsidized. The former employee is responsible for paying the entire premium—both their share and the portion the employer used to cover—plus a small administrative fee. This is why it often feels so expensive. Finally, it’s not just for people who were laid off. You can also elect COBRA if you quit your job or if your hours are cut. The government offers a helpful guide to COBRA insurance that covers these details.

Am I Eligible for COBRA?

Figuring out who qualifies for COBRA can feel complicated, but it really comes down to three things: the size of your company, the employee’s specific situation, and the reason they lost their health coverage. Not every employee who leaves your company will be eligible. COBRA is designed as a temporary safety net for individuals and their families who lose group health benefits due to specific life events.

As an employer, understanding these rules helps you guide your team through difficult transitions. The law outlines specific criteria for what’s called a “qualifying event” and who counts as a “qualified beneficiary.” This ensures that continuation coverage is offered consistently and fairly. Let’s break down exactly what that means for your employees, their families, and your business.

Qualifying Life Events for Employees

An employee becomes eligible for COBRA when they lose their health insurance due to certain qualifying life events. This doesn’t apply if an employee is fired for “gross misconduct,” but it covers most other common scenarios. The primary trigger is a change in employment status that results in a loss of coverage.

Some of the most common qualifying events for an employee include:

• Voluntarily leaving their job
• Being laid off or having their employment terminated for reasons other than gross misconduct
• Having their work hours reduced to the point where they no longer qualify for the company’s health plan

Essentially, if a change in their job situation is the direct cause of losing their health benefits, they will likely be eligible to continue their coverage through COBRA.

Can My Family Get COBRA Coverage?

COBRA eligibility isn’t limited to just the employee. Their family members can also qualify for continuation coverage, which is a huge relief during a life transition. Qualified beneficiaries typically include the employee’s spouse, former spouse, and dependent children, as long as they were covered by your group health plan the day before the qualifying event occurred.

Dependents can elect COBRA coverage even if the employee doesn’t. They may also have their own qualifying events, such as:

• The death of the covered employee
• Divorce or legal separation from the covered employee
• A dependent child aging out of their parent’s plan

This ensures that family members have a way to maintain their health insurance without interruption, even when their circumstances change unexpectedly.

Does Your Company Size Matter?

Yes, company size is a key factor in determining whether federal COBRA rules apply to your business. Generally, COBRA applies to group health plans maintained by private-sector employers with 20 or more employees. This count includes both full-time and part-time employees. To calculate your total, you can count each part-time employee as a fraction of a full-time employee, based on the hours they worked.

If your business has fewer than 20 employees, you may not be subject to federal COBRA. However, Washington State has its own continuation coverage law, often called “mini-COBRA,” which applies to smaller businesses. These state-specific rules can have different requirements and coverage periods. Navigating these regulations is a core part of how we support our small group clients, ensuring you stay compliant while caring for your team.

Who Isn’t Covered by Federal COBRA?

While COBRA provides a crucial safety net for many, it doesn’t apply to everyone. Certain employers are exempt, and specific situations can disqualify an employee from eligibility. Understanding these exceptions is just as important as knowing the rules. For instance, federal COBRA does not apply to health plans sponsored by the federal government or certain church-related organizations. More commonly, an employee who is terminated for “gross misconduct” loses their right to elect COBRA. This term isn’t for simple poor performance; it refers to serious violations, and the federal guidelines are specific about this distinction.

The most frequent exclusion relates to company size. As we touched on, businesses with fewer than 20 employees are not subject to federal COBRA. This is a critical point for many Washington businesses. However, that doesn’t mean you’re off the hook. Washington has its own state continuation law, or “mini-COBRA,” that covers employees of smaller companies. These state-level rules can differ from federal COBRA in terms of eligibility and the length of coverage offered. This is where having a local expert becomes invaluable, as we help our clients manage both federal and state requirements to ensure they remain fully compliant. You can find more details on general exclusions from resources like COBRA Insurance.

How Much Does COBRA Cost and How Long Does It Last?

Two of the most pressing questions employees have about COBRA are how long they can keep their coverage and what it’s going to cost them. The answers depend on the specific qualifying event and understanding how health insurance premiums are structured. For many, the cost is the biggest factor in deciding whether to elect COBRA or explore other options. As an employer, having this information ready can help your departing employees make a clear-headed decision during a stressful time. It’s all about providing clarity on the timeline and the financial commitment involved so they can choose the path that best suits their family’s needs.

Understanding the 18-Month Coverage Period

For most qualifying events, like leaving a job or having hours reduced, COBRA coverage lasts for a standard period of 18 months. This timeframe is designed to provide a solid bridge of health coverage, giving former employees enough time to find a new job with benefits or secure a plan on the individual market. Think of it as a safety net that ensures you don’t have to go without essential health benefits while you’re in transition. The 18-month clock typically starts on the date of the qualifying event, not the date you elect coverage, so it’s important to keep track of your deadlines. This is the most common duration and applies to the majority of people who become eligible for COBRA.

Can I Get COBRA for 36 Months?

In certain situations, COBRA coverage can be extended beyond the standard 18 months, up to a maximum of 36 months. These extensions are typically granted for secondary qualifying events. For example, if a dependent (like a spouse or child) experiences a second event—such as the death of the former employee, divorce, or legal separation—their coverage could be extended. A disability determination by the Social Security Administration can also extend coverage for the employee and their family. These extensions provide continued support during particularly challenging life events, ensuring that families maintain their health coverage when they might need it most. You can find more details on these specific scenarios in our company FAQs.

How COBRA Premiums Are Calculated

When an employee enrolls in COBRA, they become responsible for paying the entire health insurance premium themselves. This includes the portion they were paying as an employee and the portion their employer was contributing on their behalf. On top of that, the plan administrator can add a 2% administrative fee to cover the costs of managing the plan. So, the total COBRA premium is 102% of the full cost of the health plan. This is a significant shift from having an employer subsidize the cost, and it’s the primary reason why COBRA feels so expensive compared to what an employee is used to paying from their paycheck.

Why Is COBRA So Expensive?

The sticker shock of COBRA is very real. Most people are surprised by the high cost because they’ve never had to consider the full price of their health insurance before. When you’re employed, your company often pays a large percentage of the premium as part of your benefits package. For example, if the total monthly premium is $600, your employer might have paid $400 while you paid $200. Under COBRA, you would be responsible for the full $600, plus the 2% admin fee, making your new monthly payment $612. This is why it’s so important for businesses to partner with an expert who can help them build a sustainable benefits strategy and communicate that value to their team.

Typical COBRA Premium Costs

So, what does this actually look like in dollars and cents? While it varies, it’s not uncommon for monthly COBRA premiums to range from $400 to $700 per person for individual coverage. For family plans, that cost can easily climb into the thousands. The final price tag depends entirely on the group health plan the employee was enrolled in—a plan with a lower deductible and a broad network of doctors will cost significantly more than a high-deductible plan. The specific cost is tied to the plan’s network, which employees can often review using a provider search tool. This high cost is precisely why many former employees ultimately seek more affordable coverage on the state health exchange, but COBRA remains a critical option for those who need to maintain continuity of care with their current doctors.

How to Enroll in COBRA

The COBRA enrollment process isn’t something you can put off. It’s a time-sensitive system with firm deadlines that both employers and former employees need to follow. As an employer, understanding this timeline is key to fulfilling your obligations and helping your team members make a smooth transition. For the employee, it’s about making an informed decision without missing their window of opportunity.

The process kicks off automatically after a “qualifying event,” like an employee leaving the company or a reduction in their hours. From there, a series of notifications and deadlines begins. The health plan administrator is responsible for sending out the official notice, but it’s helpful for you to know what your former employee can expect. Let’s walk through the key steps so you can feel confident in the process and answer any questions that come your way.

Taking the First Step: How to Initiate the Process

The process officially kicks off with you, the employer. After a qualifying event occurs, you must notify your health plan administrator. This notification is the trigger that sets everything in motion. Once the administrator receives this information, they are required to send a COBRA election notice to the former employee, explaining their rights and the steps for enrollment. From the employee’s perspective, their first step is to watch for this notice and then make a decision. They have a 60-day window to formally elect coverage by following the instructions provided. Managing these critical deadlines is a key compliance task, and it’s exactly the kind of administrative detail our team at WHIA handles, ensuring every step is completed correctly and on time so you can focus on your business. The U.S. Department of Labor provides clear guidelines on these timelines.

Don’t Miss Your Election Notice

The first step in the COBRA process is notifying the health plan that a qualifying event has occurred. Depending on the event, this responsibility falls to either you, the employer, or the employee. Once the plan administrator is notified, they are required to send the former employee and any other qualified beneficiaries an “election notice.” This document officially explains their right to continue their health coverage under COBRA. According to the U.S. Department of Labor, the plan must provide this notice within 14 days of being informed of the event. This notice is the starting gun for the employee’s decision-making period. You can find more details on the federal rules for Continuation of Health Coverage (COBRA) on their website.

When to Expect Your Notice

The timeline for receiving a COBRA notice can feel a bit confusing, but it follows a set schedule. After a qualifying event, your employer has 30 days to inform the health plan administrator. Once the administrator gets that notification, they have another 14 days to send the official election notice. This means you should generally expect to receive your COBRA paperwork in the mail within about 45 days of your last day of employment. If that window passes and you still haven’t received anything, it’s a good idea to follow up with your former HR department. The U.S. Department of Labor outlines these deadlines to ensure everyone has a fair chance to enroll.

You Have 60 Days to Enroll

Once an individual receives their COBRA election notice, the clock starts ticking. They have a 60-day window to make a choice. This period, known as the election period, is their time to review the costs, consider other insurance options, and decide whether continuing their current plan is the right move for them and their family. It’s crucial to understand that this is a hard deadline. If they don’t elect COBRA within these 60 days, they forfeit their right to the coverage. This window gives them time to explore alternatives, like plans on the ACA marketplace, before they decide if they want COBRA. Making a decision within this timeframe ensures they can maintain continuous health coverage without any gaps.

Making Your First Payment

The 45-Day Payment Deadline

Once an employee elects COBRA, their next step is making the first payment, and this comes with its own deadline. They have 45 days from the date they officially sign up to submit their first premium. While this grace period offers some breathing room, it’s a hard cutoff. If they miss this window, their coverage can be canceled retroactively, creating an insurance gap they were trying to avoid. This is a crucial piece of information to share with departing employees, as it ensures they don’t lose their coverage due to a simple oversight during a busy transition.

The amount due for that first payment is often what causes the most confusion. It includes the full premium—both the portion the employee used to pay and the part your company contributed—plus a 2% administrative fee. Because this can be a significant expense, it’s important they’re prepared for it. The U.S. Department of Labor outlines these rules in its guide to the Continuation of Health Coverage (COBRA). Making sure your former employees are aware of this financial commitment helps them make a clear-headed decision about their health care.

What Paperwork Is Needed?

Enrolling in COBRA is less about filling out mountains of paperwork and more about meeting specific criteria. To be eligible, an individual must satisfy three core requirements. First, their former employer’s health plan must be covered by COBRA, which generally applies to private-sector employers with 20 or more employees. Second, a “qualifying event” must have happened that caused them to lose health benefits. Finally, they must be a “qualified beneficiary,” which includes the covered employee, their spouse, and any dependent children. The election notice they receive will include the specific forms needed to officially opt-in, but meeting these foundational requirements is the most important part. You can learn about COBRA insurance and these requirements in more detail on the official U.S. government website.

COBRA Alternatives: What Else Is Out There?

While COBRA provides a valuable safety net, its high price tag means it isn’t always the right choice for every employee. The good news is that there are several other paths to getting health coverage after leaving a job. Understanding these options allows you to be a better resource for your team during a time of transition. When an employee is weighing their next steps, they can explore everything from marketplace plans to short-term solutions. Helping them see the full picture can make a significant difference. Let’s walk through the most common alternatives to COBRA.

Affordable Care Act (ACA) Marketplace

The Affordable Care Act (ACA) Marketplace, known in our state as the Washington Healthplanfinder, is often the best alternative to COBRA. Losing job-based health insurance is considered a “qualifying life event,” which opens a 60-day special enrollment period for your former employee to sign up for a new plan.

Unlike some other options, all marketplace plans are comprehensive and must cover pre-existing conditions. The biggest advantage is affordability. Based on their new income situation, your employee may qualify for government subsidies or tax credits that can dramatically lower their monthly premiums. For many people, an ACA plan offers comparable or even better coverage than their old plan for a fraction of the cost of COBRA.

Short-Term Health Plans

Think of short-term medical insurance as a temporary bridge, not a long-term solution. These plans are designed to cover gaps in coverage for a few months, which can be perfect for someone who is healthy and expects to get new employer-sponsored insurance soon. The main draw is the low monthly premium.

However, that lower cost comes with significant trade-offs. Short-term plans are not regulated by the ACA, meaning they often don’t cover essential health benefits like maternity care, mental health services, or prescription drugs. They can also deny coverage or charge more based on pre-existing conditions. It’s a viable option for catastrophic coverage in a pinch, but it’s crucial for employees to understand the limited scope of these plans.

Comparing Costs: Short-Term Plans vs. COBRA

When comparing costs, the difference is stark. With COBRA, an employee is responsible for the entire health insurance premium, which can be up to 102% of the plan’s total cost. This often leads to sticker shock, as they are now covering the portion your company previously paid. In contrast, short-term health plans can seem incredibly affordable, with very low starting premiums. However, this lower price comes at a steep trade-off. Short-term plans are not required to cover essential health benefits and can deny coverage for pre-existing conditions. While COBRA is almost always the more expensive option, it guarantees the same comprehensive coverage and network of doctors the employee is used to.

Joining a Spouse’s or Parent’s Plan

For employees with an insured spouse or partner, this is often the simplest and most affordable route. Losing their own health coverage triggers a special enrollment period, allowing them to join their family member’s plan, usually within 30 to 60 days of their last day of work. This is a fantastic way to ensure continuous, high-quality coverage without interruption.

The cost of adding a dependent to an existing employer plan is typically much lower than a full COBRA premium. If this option is available, it should be one of the first things your departing employee looks into. They will need to coordinate with their spouse’s HR department to get the necessary paperwork started promptly.

Medicaid or CHIP

If an employee’s income drops significantly after leaving their job, they may become eligible for Washington Apple Health, our state’s Medicaid program. Apple Health provides free or low-cost comprehensive health care coverage for individuals and families who meet certain income requirements. It’s an essential safety net designed to ensure everyone has access to medical care, regardless of their employment status or ability to pay.

Eligibility is based on current monthly household income, so a recent job loss can make someone newly qualified even if they weren’t before. It’s always worth encouraging employees in this situation to see if they can enroll in Apple Health to get the support they need.

Health Care Sharing Ministries

Health sharing ministries are a unique alternative where members, who typically share a common faith, contribute monthly payments to a collective fund to cover each other’s medical expenses. These programs can have much lower monthly costs than traditional insurance, which makes them appealing.

However, it is critical to understand that health sharing ministries are not insurance. They are not regulated by the state and do not guarantee payment for medical bills. They can deny coverage for pre-existing conditions and may not cover services that conflict with their religious values. While they work well for some, they carry risks and lack the consumer protections of ACA-compliant plans. This option is best for those who fully understand and are comfortable with the model.

Direct Primary Care (DPC) Memberships

Direct Primary Care (DPC) is an innovative model that simplifies access to routine medical services. Instead of billing an insurance company, a patient pays their doctor’s office a flat, recurring monthly fee—like a subscription. This fee typically covers most primary care services, including office visits, telehealth appointments, and some basic lab work, with no copays or deductibles.

DPC is not health insurance; it doesn’t cover hospitalizations, specialist visits, or major emergencies. For that reason, it’s usually paired with a high-deductible health plan to protect against catastrophic events. For someone looking for predictable, affordable access to a primary care doctor, a DPC membership combined with a marketplace plan can be a great strategy.

Is COBRA Worth It? A Look at the Pros and Cons

When an employee leaves your company, they face a big decision about their health coverage. COBRA is often part of that conversation, but it’s not always the right fit for everyone. Understanding the benefits and drawbacks can help you guide your former employees toward making an informed choice. Let’s break down the good and the not-so-good of continuing coverage through COBRA.

Pro: Keep Your Doctors and Health Plan

The biggest draw of COBRA is continuity. For someone in the middle of treatment or who simply loves their doctor, the thought of switching is stressful. COBRA allows a former employee to keep the exact same health insurance plan they had while working for you. This means their network of doctors, hospitals, and specialists remains unchanged. They don’t have to worry about finding a new primary care physician or checking if their preferred specialist is in-network with a new plan. It offers a sense of stability during a period of significant life change.

Pro: Your Pre-Existing Conditions Are Still Covered

Because COBRA is a continuation of the same health plan, there are no new medical exams or questions about health history. Any pre-existing conditions that were covered under your group plan will continue to be covered without interruption. This is a critical benefit for individuals managing chronic illnesses, undergoing long-term treatment, or taking regular prescription medications. They can continue their care seamlessly, without the fear of a new insurance plan denying coverage or imposing a waiting period for their specific health needs. This provides invaluable peace of mind.

Pro: Avoid a Gap in Health Coverage

A lapse in health insurance can be risky and expensive. COBRA is designed to prevent this. If an eligible person elects COBRA within their 60-day window, their coverage is retroactive to the date they lost their job-based insurance. This means if they have a medical emergency or need to see a doctor during that decision period, their expenses will be covered once they enroll and pay their premiums. This retroactive feature ensures there is no gap where they are uninsured and financially vulnerable, providing a crucial safety net during their transition.

Con: The Sticker Shock of High Premiums

Here’s the catch: COBRA is expensive. While employed, your company likely paid a significant portion of the health insurance premium. With COBRA, the former employee is now responsible for paying the entire premium—both their share and the share your company used to cover. On top of that, they can be charged a 2% administrative fee. This sudden increase in cost can be a major financial shock for someone who has just lost their income. It’s often the primary reason people seek out COBRA alternatives on the marketplace.

Con: It’s a Temporary Solution with More Admin

COBRA is a bridge, not a permanent destination. The coverage is temporary, typically lasting for 18 months, though some situations can extend it to 36 months. Once that period ends, the individual must find a new insurance plan. Additionally, they are now managing their benefits on their own. They no longer have an HR department to answer questions or help with issues. They are responsible for making payments on time and handling any administrative tasks directly with the insurance carrier, which can feel overwhelming without the support system they were used to.

A Washington Employer’s Guide to COBRA

When an employee leaves your company, managing their benefits transition is a critical final step. As an employer, you have specific legal obligations and an opportunity to support your former team members during a significant life change. Handling this process with clarity and care protects your business and maintains a positive reputation. It shows both departing and current employees that you value their well-being. Here’s what you need to know about your responsibilities and how to manage the COBRA process effectively.

Your Legal Responsibilities for COBRA Administration

As a Washington employer, you have a legal duty under the Consolidated Omnibus Budget Reconciliation Act, or COBRA. The law requires you to inform employees and their families about their right to continue their health benefits after a job loss or other qualifying event. This isn’t just a suggestion—it’s a federal requirement. Your responsibility is to provide timely notices explaining their options for continuation of health coverage. Failing to do so can lead to penalties. Think of it as the formal offboarding for health insurance; it ensures former employees aren’t left in the dark about their choices.

Where to Find Official Guidance

Figuring out the details of COBRA can feel overwhelming, but there are excellent resources available to give you clear, accurate information. The U.S. Department of Labor (DOL) is the definitive source for federal law. Their website offers comprehensive guidance on COBRA, breaking down everything from eligibility requirements and qualifying events to the rules for enrolling in coverage. It’s the best place to start for understanding the core regulations that apply nationwide. This official site helps you confirm your responsibilities as an employer and provides fact sheets and FAQs that you can share with your team to answer their most common questions.

For help with Washington-specific laws that may apply to smaller businesses, our team is here to help you get started. We can help you understand the nuances of both federal and state continuation laws and explore the best options for your company and your employees. Since COBRA isn’t always the most affordable choice, it’s also important to point employees toward the Washington Healthplanfinder. Losing job-based insurance creates a special enrollment period, allowing them to find a new plan, often with financial assistance. Directing them to these resources ensures they have the information they need to make the best decision for their situation.

How to Support Employees During a Transition

Losing a job is stressful, and insurance can feel overwhelming. Your role is to provide clear, supportive information, even if the employee is upset. The key is communicating COBRA benefits in a way that’s easy to understand. Provide them with all the necessary details about costs, coverage, and enrollment deadlines. This empowers them to make an informed decision for their family. By handling this conversation with empathy and professionalism, you provide a steady hand during a turbulent time, reinforcing your company’s commitment to its people, past and present.

How a Broker Can Simplify COBRA for You

Let’s be honest—managing COBRA administration on top of your daily responsibilities is complex and time-consuming. This is where a knowledgeable partner can step in. By partnering with brokers who specialize in benefits, you can offload the administrative burden and ensure you remain compliant. A dedicated broker acts as an extension of your HR team, handling the paperwork, answering tough questions from former employees, and making sure every step is handled correctly. This frees you to focus on your business, confident that your benefits administration is in expert hands. It’s the smartest way to manage a complicated process.

Related Articles

• How to Get COBRA Insurance: A Simple Guide
• How Long Does COBRA Last? Your Timeline Explained
• COBRA Loophole 60 Days: How It Works for You
• COBRA 60-Day Loophole: Retroactive Coverage Explained

Frequently Asked Questions

What’s the difference between federal COBRA and Washington’s mini-COBRA law? The main difference comes down to company size. Federal COBRA laws apply to businesses with 20 or more employees. If your company is smaller than that, you’ll likely fall under Washington State’s continuation law, often called “mini-COBRA.” While the goal is the same—to provide a temporary bridge for health coverage—the state rules can have slightly different requirements and coverage periods. We help our small business clients handle these state-specific regulations to ensure they’re always compliant.

Do I have to offer COBRA to an employee I fired? In most cases, yes. Terminating an employee, whether it’s a layoff or for performance reasons, is considered a qualifying event that triggers COBRA eligibility. The only exception is if the employee was fired for “gross misconduct,” which is a high legal standard that typically involves serious issues like theft or workplace violence. For nearly all other terminations, you are required to provide the employee with a COBRA election notice.

Can a former employee keep their medical plan but drop their dental plan under COBRA? Yes, they can. A former employee has the flexibility to continue any or all of the health benefit plans they were enrolled in before they left. For example, they can choose to continue their medical coverage to keep their doctor but decide to drop their dental and vision plans to save money. The choice is theirs, based on what makes the most sense for their family’s needs and budget.

What happens if a former employee is late paying their COBRA premium? There is a grace period for late payments, which is typically 30 days after the due date. If the former employee pays their premium within this window, their coverage continues without interruption. However, if they fail to make the payment by the end of the grace period, their COBRA coverage will be terminated permanently. They will not be able to re-enroll, so it’s very important for them to stay on top of their payment schedule.

If my former employee chooses COBRA, can they switch to a marketplace plan later on? This is a key point to understand. Simply wanting to switch from COBRA to a cheaper marketplace plan is not a qualifying event for a special enrollment period. Generally, if an employee elects COBRA, they must keep it until the coverage period ends or until the next annual open enrollment period for the marketplace. The best time to compare COBRA with marketplace plans is during their initial 60-day election window after leaving the company.