What Is COBRA?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 gives employees and their dependents the right to temporarily continue group health insurance coverage after a qualifying event that would otherwise result in a loss of coverage. COBRA applies to employers with 20 or more employees who sponsor group health plans.
For HR professionals studying for the SHRM-CP or SHRM-SCP exam, COBRA is an important benefits compliance topic. Questions typically focus on qualifying events, coverage periods, notification timelines, and the calculation of premiums. Understanding these details is essential for both exam success and day-to-day benefits administration.
COBRA coverage extends the same benefits the individual had before the qualifying event, meaning the scope and terms of coverage remain unchanged. However, the individual is responsible for paying the full premium cost (both the employer and employee portions), plus a 2% administrative fee.
Qualifying Events and Coverage Periods
COBRA continuation coverage is triggered by specific qualifying events. The type of event determines who is eligible and how long coverage lasts:
For employees (qualified beneficiaries):
- Voluntary or involuntary termination of employment (for reasons other than gross misconduct): 18 months
- Reduction in hours worked: 18 months
For spouses and dependent children:
- All of the above: 18 months
- Employee becomes entitled to Medicare: 36 months
- Divorce or legal separation: 36 months
- Death of the covered employee: 36 months
- Dependent child loses dependent status: 36 months
The 18-month period can be extended to 29 months if the qualified beneficiary is determined to be disabled by the Social Security Administration within the first 60 days of COBRA coverage.
Note that termination for gross misconduct disqualifies an employee from COBRA coverage entirely. However, "gross misconduct" is narrowly defined and does not include ordinary performance issues or minor policy violations.
Notification Requirements
COBRA has strict notification timelines that HR professionals must follow:
- Employer to plan administrator: The employer must notify the plan administrator within 30 days of a qualifying event (such as termination or reduction in hours).
- Employee/beneficiary to plan administrator: For qualifying events such as divorce, legal separation, or a child losing dependent status, the qualified beneficiary must notify the plan administrator within 60 days.
- Plan administrator to qualified beneficiary: The plan administrator must provide a COBRA election notice within 14 days of receiving notification of the qualifying event.
- Election period: The qualified beneficiary has 60 days from the later of the date of the qualifying event or the date of the election notice to elect COBRA coverage.
If COBRA is elected, the individual has 45 days from the date of election to make the initial premium payment. Coverage is retroactive to the date of the qualifying event, so there is no gap in coverage.
These timelines are frequently tested on the SHRM exam. Pay particular attention to the 30-day, 14-day, and 60-day deadlines.
HR Administration Best Practices
Effective COBRA administration requires attention to detail and consistent processes:
- Provide the general COBRA notice to all new plan participants at the time of enrollment.
- Track qualifying events carefully and ensure timely notification to the plan administrator.
- Use a reliable tracking system (or outsource to a COBRA administrator) to manage election periods, premium payments, and termination dates.
- Document all communications and retain records of notices sent and received.
- Be aware of state "mini-COBRA" laws that may apply to smaller employers not covered by federal COBRA.
Start Practicing Today
COBRA compliance is tested on the SHRM certification exam, which includes 134 questions over 4 hours at Prometric or OnVUE. Master the qualifying events, coverage periods, and notification timelines to answer these questions with confidence.
SHRMpractice.com covers COBRA and all major benefits compliance topics. Take our diagnostic to identify areas for improvement, and create your account to start practicing today.