COBRA, the landmark Consolidated Omnibus Budget Reconciliation Act of 1985, is a familiar term among many employers. It’s a crucial piece of legislation that primarily affects private-sector companies with 20 or more employees offering an employer-sponsored health plan. Not stopping there, COBRA extends its reach to include plans sponsored by state and local governments as well. However, it’s interesting to note that federal government employees, churches, and certain church-affiliated organizations are exempt from COBRA’s provisions.

If COBRA does not affect your group, you could be subject to the state-equivalent known as Cal-COBRA. It applies to employers and group health plans with 2-19 employees.

Both full- and part-time employees are counted to determine whether a group is subject to COBRA or Cal-COBRA.

COBRA and Cal-COBRA offer a lifeline, allowing eligible individuals to keep their group health insurance when life throws a curveball that could otherwise end their coverage.

COBRA Costs and Alternatives

Employers might pick up the tab for COBRA continuation coverage, making it easier for you to stay insured. However, it’s more common for employers to ask you or your family to foot the bill. But keep in mind, the premiums have a cap—they can’t be more than the full cost of the insurance plus a small 2% admin fee.

It’s important to mention that employees and their dependents might qualify for other coverage options that could be cheaper than COBRA continuation.

For example, an individual health plan available through an Affordable Care Act (ACA) Marketplace might be more affordable than COBRA. According to Covered California, the Golden State’s ACA Marketplace, 90% of enrollees receive financial help in 2024. Members get an average of $5,000 per year to help them reduce the cost of health insurance. That means more than half of Californians could pay less than $10 per month.

Another option may be a “special enrollment” in other group health coverage. Under the Health Insurance Portability and Accountability Act (HIPAA), in some circumstances, group health plans must allow those who previously declined coverage for themselves and eligible dependents to enroll. For example, if an employee loses group health insurance through a spouse, the employee can enroll in his/her/their employer-sponsored plan. The request for a special enrollment must be made within 30 days of the loss of other coverage.

If an individual is 65 or older, or younger with a disability or End-Stage Renal Disease, enrollment in Medicare may be a third option. For details, visit the U.S. Department of Health and Human Services website.

Who’s Entitled to COBRA Continuation?

Covered employees, former employees, spouses, former spouses, and dependent children may be eligible for COBRA continuation due to:

• A covered employee’s job loss or reduction in hours (and eligibility for insurance)– for reasons other than gross misconduct;
• A covered employee becomes entitled to Medicare;
• A covered employee’s divorce or legal separation;
• A child’s loss of dependent status under the plan (and loss of coverage);
• A covered employee’s death.

Who gets COBRA coverage? It all depends on the qualifying event. From situations like employer bankruptcy to retirees and their families, eligibility varies. Even children born to or adopted by an insured employee, independent contractors, and directors in the company’s health plan can qualify.

COBRA generally does not apply to someone who loses a job due to “gross misconduct.”

Length of COBRA Continuation

A person’s maximum coverage continuation period depends on the triggering event that prompted the loss of employer-sponsored coverage; it can range from 18 months to 36 months, depending on the triggering event. In certain circumstances, if a disabled individual and non-disabled family member members are qualified beneficiaries of Medicare, they are eligible to up to an 11-month extension of COBRA – for a total of 29 months.

If your business is based in California, there’s an added benefit. An event that qualifies for an 18-month duration can get an additional 18-month extension, bringing the total to 36 months under Cal-COBRA. But this bonus time applies only to medical coverage – dental or vision aren’t included.

COBRA FAQs

You can check out frequently asked questions about COBRA at the U.S. Department of Labor, Employee Benefits Security Administration, FAQs online. For a Q&A on Cal-COBRA, visit the California Department of Manager Health Care website.

One of the value-added extras offered by CaliforniaChoice to employers is the Business Solutions Suite. You get Cal-COBRA or Federal COBRA billing services, a Premium Only Plan (POP), and Flexible Spending Accounts (FSAs) for your employees – and more. Ask your employee benefits broker for details. If you don’t already have a broker, we make it easy to search for one.