Chapter 16:
Counting COBRA Time Clock Correctly

Updated as of June 2006



The Consolidated Omnibus Reconciliation Act of 1985 (COBRA) mandates that covered employers offer continuation of group health care coverage to certain covered employees and/or their dependents when certain events result in a loss of coverage. The term "covered employee" also includes independent contractors, partners and other non-employees covered by a group health plan because of services performed.

Covered employers are generally those having at least 20 employees (full or part-time) on the payroll. Excluded employers include those operating a church plan and the federal government. State or local governments are covered if they receive funds under the Public Health Service Act.

Individuals electing continuation coverage may be charged up to 102% of the total cost of the coverage. A higher charge to certain disabled individuals is discussed under Disability Extension.

Many of the time lines involved in COBRA confuse employers and make compliance with the law complex. But not understanding these time lines can bring more than confusion. There are both tax and civil penalties that could be applied for not obeying COBRA requirements, in addition to the possibility of a civil suit.

Qualifying Events and Qualified Beneficiaries

To understand COBRA, one must keep in mind two basic definitions. A "qualifying event" is an event that results in a loss of coverage and that allows an individual to make an election to continue coverage. A "qualified beneficiary" is an individual who has the right to independently elect continuation coverage as a result of a "qualified event." All persons covered under the plan the day before a qualifying event are qualified beneficiaries and have independent election rights (employee and family members). Newborns and adopted children of the covered employee added after a COBRA ride starts are also qualified beneficiaries.

Specific Qualifying Events

Qualified beneficiaries (employees and dependents) losing coverage as a result of the following events must be allowed to elect COBRA for 18 months:

  • Termination except for gross misconduct (voluntary or involuntary, retirement, layoffs).
  • Reduction of hours (leaves of absences, full-time to part-time, strikes).

Qualified beneficiaries who are dependents losing coverage as a result of the following qualifying events must be allowed to elect COBRA for 36 months:

  • Death of a covered employee.
  • A covered employee's divorce or legal separation.
  • A covered employee becomes entitled to Medicare (actually covered, not merely eligible).
  • Loss of dependent child under the plan's rules.

It is important to note that the COBRA continuation coverage (18 or 36 months) may be counted from the date that causes the loss of coverage (termination etc.) not the date the coverage is actually lost. However, no insurance provided during a leave under the Family and Medical Leave Act (FMLA) may be credited toward COBRA continuation coverage.

Qualified beneficiaries who are retirees or surviving spouses at the time of the following must be allowed to elect COBRA for lifetime:

  • An employer's filing for bankruptcy resulting in substantial elimination of coverage within one before or after year of the filing.

Multiple Qualifying Events - After COBRA Starts

A qualified beneficiary may have a second qualifying event or "multiple qualifying events". The second qualifying event will extend the duration of the COBRA coverage. A second COBRA event will extend an 18 month COBRA coverage period to a total period of 36 months (counting from the date of the first qualifying event). Only the employee's covered spouse and covered dependent children can experience a multiple qualifying event.

Multiple qualifying events occur after the first qualifying event (termination or reduction in hours) and include a subsequent event such as:

  • A divorce or legal separation of the covered employee.
  • Loss of dependent child status under the plan's rules.
  • After electing COBRA, a covered employee becoming entitled to Medicare (actually covered).
    Note: This is a multiple qualifying event only if the covered employee's Medicare entitlement would have resulted in a loss of coverage had it occurred during active employment.
  • The death of a covered employee.

COBRA and Medicare

Where an employee becomes entitled to Medicare and, within 18 months thereafter, separates from employment or has a reduction in hours, he is still eligible for COBRA. The spouse and dependents (who have coverage) may elect COBRA continuation for 36 months measured from the date of Medicare entitlement or 18 months from the employee's termination, whichever is longer.

If an individual becomes entitled to Medicare before signing a COBRA election form, they may still elect COBRA.

NOTE: Medicare entitlement means a person is actually signed up for Medicare, able to submit a bill and get it paid. Medicare entitlement does not mean merely attaining the age of 65.

Disability Extension

If a qualified beneficiary is disabled according to Social Security criteria at any time during the first 60 days of continuation coverage (COBRA), their 18 months COBRA continuation may be extended for another 11 months (total of 29 months). For the last 11 months, the plan may charge up to 150% of the cost of the coverage instead of the usual 102%.

The disabled person must apply for and receive the Social Security disability designation before the end of the 18 months and notify the plan administrator before the 18 month continuation coverage ends. Notification to the plan administrator must be postmarked within 60 days of the disability determination. Qualified beneficiaries must be notified about the 60 day notification rule.

Note that this extension is available only when the disability designation is deemed in effect at any time during the first 60 days of COBRA continuation coverage. The designation, however, can be made by Social Security retroactively. If the disability designation is lifted, the qualified beneficiary must notify the plan administrator within 30 days and the COBRA extension would end. All members of the family who are qualified beneficiaries, not just the disabled, and have rights to the 11 month extension. Only the disabled individual may be charged the 150% rate if the disabled individual made an individual election as a qualified beneficiary. However, if the family continues as a unit with the disabled qualified beneficiary in the unit, then the 150% rate may be charged for the family unit.

Terminating COBRA

COBRA may not be terminated before the end of the COBRA continuation coverage unless:

  • The covered individual fails to make a timely premium payment.
  • After electing COBRA, the covered individual becomes covered by any other group health plan that does not contain any exclusion or limitation for any of the individual's pre-existing conditions. This rule does not apply to the military healthcare program, TRICARE or other federal healthcare programs.
  • After electing COBRA, the covered individual becomes entitled to Medicare (actually covered not solely being age 65). This rule does not apply to the military healthcare program, TRICARE or other federal healthcare programs. Nor does it apply to Medicaid coverage.
  • The employer ceases to maintain any group health plan (including successor plans).

First COBRA Notice

The group plan must provide written notice of the right to continue coverage to all covered employees and covered spouses upon entering the plan. Starting on plan years on or after January 1, 2005 the plan will have 90 days from date of coverage to provide this notice. The Department of Labor has stated that good-faith compliance with this requirement is met by mailing the notice first class mail to the last known address addressed to Mr. & Mrs. In addition, COBRA rights must be included in the summary plan description of each group health plan. When new spouses are added on to the plan, this notice must be provided again.

Notice to Plan Administrator From the Employee or Dependent

Within 60 days of the date of the divorce, legal separation or loss of dependent status, the employee or affected dependent must notify the plan administrator of the event (60 days from these events or the loss of coverage due to these events, whichever is later). If such notification is not met, COBRA rights may be denied. This 60-day rule should be incorporated into the first COBRA notice and because it relates to spouses and dependent children the preference for the first notice to be mailed home is all the stronger.

Notice From Employer to Plan Administrator

If the employer is not the plan administrator, the employer must notify the plan administrator of certain qualifying events. A qualifying event is one that triggers the right to continue group health care coverage. If the coverage is lost as a result, the employer must notify the plan administrator within 30 days of:

  1. Termination (for reason other than gross misconduct);
  2. Reduction of hours;
  3. Death of covered employee;
  4. Employee's entitlement to Medicare (actually covered); or
  5. The employers filing for bankruptcy.

Employers covered under a multi-employer plan may take longer than 30 days to notify the plan administrator if the plan has a provision for a longer period to notify.

COBRA Offer Letter

The plan administrator has 14 days from receipt of the employer's notice (described above) to extend a written COBRA offer and explanation of rights to all affected qualified beneficiaries (persons who may independently elect COBRA). Plan administrators for multi-employer plans may take longer than 14 days if the plan provides for a longer period.

Employers who are the plan administrator may take 44 days from the date of the qualifying event to extend a formal COBRA offering (30 days – employer to plan administrator, plus 14 days – plan administrator to beneficiary). It is in the employer's interest to send the letter as soon as possible so that the COBRA election period is not delayed. Additionally, some courts have mandated that an employer/plan administrator meet a 14-day notice requirement, not 30 days + 14 days.

Election notices may be sent by first class mail to the last known address. Proof of sending is advised. Employees with no covered dependents could be given the letter in the exit interview. It is recommended that these employers sign an acknowledgment that they have received the COBRA notice.Because each qualified Sbeneficiary has the right to make an independent election, it is wise to send separate letters to each qualified beneficiary as opposed to one letter addressed "to the family of " or "Mr. & Mrs."

As discussed, the 14 day time limit to send the COBRA offer letter generally starts from the date that causes the loss of coverage even though the coverage may not be lost on that date. Alternatively, COBRA law allows that the offer may be sent within 14 days of the actual loss of coverage.

Election Period

The election period for a qualified beneficiary to elect COBRA coverage is 60 days from the later of: 1) the date coverage is lost or 2) the date the qualified beneficiary receives notice of the right to elect continuation coverage. Election is timely if it is postmarked within 60 days.

Two Additional Notices - For Plan Years Starting On Or After January 1, 2005

The plan administrator must provide a notice when someone not entitled for COBRA coverage notifies the plan administrator that they have experienced a qualifying event. This notice must be provided within 14 days of the plan administator's receipt of the individual's qualifying event notice.

The plan administrator must also provide a notice when COBRA coverage is terminated before the end of the maximum COBRA period for any reason.

Timely Payment Rules

There are two timely payment rules. The first is due no earlier than 45 days from the date of election in the first payment; all premiums for the last full months are due. The premium for the month in which the first payment is due must be included if the payment due date is the 30th of that month. For example, if 45 days from the election the date is August 28, then August's premium is not due on the first payment date. In this example, August's premium would be due under the subsequent payment rule, discussed next.

The second timely payment rule is for all other payments beyond the first payment. These subsequent payments must be given a grace period, which is the longest of the following:

  1. 30 days from the first day of the premium period (usually the 30th of the month).
  2. The longest period the employer would give a similarly situated individual who has not had a COBRA event to make the premium payment (usually this means a present employee).
  3. The longest period the insurance carrier would give the employer to make the premium payment.
  4. It is important to note that these time rules are seen as met if payment is post marked by these dates. If payments are short by an insignificant amount, a reminder letter must be sent and a 30-day grace period given. An insignificant amount is defined not greater than the lesser of $50 or 10% of the premium.

Individual Conversion

Any individual conversion option otherwise available under the plan must be available by written notice to qualified beneficiaries within 180 days of the end of the COBRA continuation coverage.

Increasing COBRA Premiums

Generally, a plan cannot increase premiums to COBRA qualified beneficiaries outside of a fixed 12 month period. This is one designated period elected by the plan (e.g. June to May).

Family and Medical Leave (FMLA) and COBRA

The IRS has stated that FMLA and COBRA shall not overlap. Once the FMLA leave stops and the employee does not return to work, a COBRA continuation option must be offered and none of the coverage provided under FMLA leave may be credited toward the COBRA continuation coverage. Indeed, even if the employee failed to continue coverage during FMLA, or continued coverage but failed to pay their portion of the premiums, COBRA continuation coverage must still be offered from the end of FMLA leave with no conditions attached such as paying delinquent FMLA related premiums.

The COBRA continuation coverage period will be 18 months from the end of the FMLA leave unless coverage extends beyond the FMLA leave period and the plan explicitly allows COBRA continuation coverage to be delayed until normal group health care coverage is terminated.

The notification period to extend a formal COBRA offer commences at the end of the FMLA leave (or when normal group health care coverage ends if this is later than the end of FMLA leave). This notification period is the 30 day period for the employer to notify the plan administrator of a COBRA qualifying event.


Cal-COBRA (CA Health and Safety Code §1366.20 et seq.)

18-Month Extension

For persons whose COBRA (qualifying event) is a reduction of hours or termination of employment, the continuation coverage is extended from 18 to a total of 36 months. To be eligible, the COBRA continuation coverage must have started January 1, 2003 forward. The premium for the last 18 months cannot exceed 110% of the total cost of coverage. The 18-month extension does not apply to non-core coverages such as stand alone dental or vision plans, dental-only or vision-only insurance policies. The obligation to provide the additional 18 months of coverage, along with notification of this right, rests with the health care service plan and health insurer.

California Super COBRA or Cal-Senior COBRA - Only applies to those who started this extension before January 1, 2005.

An extension of a possible extra 5 years of continuation coverage beyond the period authorized by COBRA or Cal-COBRA for persons who meet the following eligibility conditions:

  • Be at least 60 when employment ends;
  • Worked for that employer for at least 5 years; and
  • Take COBRA or Cal-COBRA continuation coverage for its full length.

This possible 5-year extension is available to spouses as well, regardless of age, who finish COBRA or Cal-COBRA. Benefits may last up to 5 years or until the individual turns 65 or becomes Medicare eligible (actually covered), among other reasons. The charge for this extension depends on factors specified in the law but cannot exceed 213%. This extension is not applicable to specialized health plans such as dental-only or vision-only plans. Eligible individuals must elect this extension by notifying the insurance carrier or health care service plan of the election, in writing, before the end of 30 calendar days from the end of COBRA or Cal-COBRA.

Cal-COBRA for Small Employers

Continuation coverage similar to federal COBRA coverage is available to employees of small employers (2-19 employees). The health care coverage that must be continued includes medical, dental and vision care plans. One significant difference – the insurer or health plan provider has the responsibility for providing notice of a qualifying event to the insurer. California's 18-month extension in addition to the 18 months of continuation coverage for a termination or reduction of hours is also available to these affected employees. However, unlike the 18-month extension on top of federal COBRA, this 18-month extension for small employers does include dental and vision care plans in addition to medical care plans.

Employees are required to notify their employer or insurer, in writing, within 60 days of the qualifying event (divorce, legal separation, or a child's loss of dependent status). Failure to do so will result in loss of eligibility for continuation. Employers are required to notify the insurer no later than 30 days after a qualifying event (termination of employment except for gross misconduct, reduction of hours, death of employee). The insurer must notify qualified beneficiaries of right to elect continuation coverage within 14 days of notification from employer.

Employers must notify the health care provider within 5 days if an employee is terminated for gross misconduct and therefore ineligible for Cal-COBRA. Employers should carefully consider this as the term "gross misconduct" is undefined.


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