COBRA is a U.S. federal program that lets employees keep their employer-sponsored health insurance for a limited time after leaving their job, getting laid off, or experiencing other qualifying life events. However, they'll need to pay the full premium themselves. COBRA stands for Consolidated Omnibus Budget Reconciliation Act, a federal legislation passed in 1984.
Think of COBRA as a safety net that bridges the gap between jobs, giving your U.S. employees up to 18 or 36 months (depending on the situation) to maintain their health coverage while they figure out their next move.
Note that COBRA isn't optional. It's a legal requirement that applies to most companies with 20 or more employees. Getting COBRA wrong can lead to hefty penalties and unhappy former employees.
Does COBRA apply to you?
You must offer COBRA continuation coverage to your employees (and their spouses and dependents) if:
- You have 20 or more employees (both full- and part-time employees count)
- You provide a group health insurance plan
- Your employee experiences a qualifying event, including:
- Voluntary or involuntary job loss (except termination for gross misconduct)
- Reduced working hours
- A divorce or legal separation
- The death of the covered employee
- A dependent child losing eligibility under the plan
COBRA coverage, which must be identical to the coverage offered during your employee's tenure, lasts up to 18 months. It can be extended to 36 months if your employee experiences another qualifying life event or becomes disabled.
Failure to comply with COBRA obligations can result in penalties, fines, exposure to legal claims from disgruntled employees, and bad press. For example, in 2022, a former employee filed a class action lawsuit against Costco for issuing "defective notices about Costco's continuing health care options," which "deterred him and thousands of others from choosing the available benefits." Costco admitted no wrongdoing and settled the lawsuit for US$750,000.
You can choose to partner with third-party COBRA administrators to manage notifications, billing, and compliance, or do it yourself. But if you do partner with a third party, remember that you're still on the hook for making sure that your administrator follows the law. If they don't, you're responsible in the eyes of the U.S. Department of Labor.
But wait, there's more …
Some states have their own "mini-COBRA" laws that employers must be aware of. California, for instance, offers Cal-COBRA, which is more robust than its federal counterpart, covering employees who worked for an organization with 2 to 19 employees.
4 required to-dos when COBRA applies to you
1 . Send out COBRA election notices to your employees on time
As an employer, you're legally required to promptly inform departing employees of their COBRA rights. COBRA election notices aren't just a courtesy-it is a federal mandate that comes with real consequences if you drop the ball.
You (not your healthcare plan administrator) are legally responsible for ensuring that COBRA election notices go out within the strict federal timelines, typically 14 days after the administrator receives a notice of a qualifying event. "My vendor messed up" won't fly as a defense if the U.S. Department of Labor finds its way to your doorstep.
That means you need to stay on top of your administrator, build election notice communication protocols, and regularly audit the process to make sure notices are going out on time.
2 . Maintain records
Your COBRA record-keeping is your legal shield when compliance questions arise, and trust us, they will.
It's a best practice to keep detailed documentation of who was eligible for COBRA, when notices were sent, how employees responded, and every twist and turn of their coverage journey. If there's ever a dispute with a former employee or a Department of Labor audit, these records are your proof that you followed the rules. Your well-organized records will tell the complete story from the moment someone becomes COBRA-eligible through their final premium payment.
With COBRA, the devil is in the details: missing or sloppy documentation can cause expensive legal headaches that could have been avoided.
3 . Know the deadlines for premium payments-and communicate them clearly
Employees must make COBRA premium payments on time. Paying late can make or break someone's healthcare coverage, and it is your responsibility as the employer to communicate the deadlines (and the gravity of them) to employees.
Inform your employees that their:
- Initial premium payment is due within 45 days of electing coverage
- Ongoing monthly payments must arrive within 30 days of their due date (there is a built-in 30-day grace period)
When you clearly communicate when premiums are due, you help prevent coverage gaps that could leave your former employees exposed during medical emergencies. Staying on top of these deadlines helps you coordinate properly with your plan administrator to ensure coverage starts and stops at the right times, which is important for legal liability reasons.
4 . Understand the legal context
COBRA is just one component of state and federal employment and healthcare laws that intersect in ways that can trip up even seasoned HR professionals.
For example, you need to understand how COBRA interacts with the Affordable Care Act (which offers marketplace alternatives that might be more affordable than COBRA premiums), the Health Insurance Portability and Accountability Act (HIPAA) requirements (which govern how you handle health information during the COBRA process), and other laws that might give employees additional rights or extend timelines.
And if you're running a global operation, don't assume that centralized benefits management means your U.S.-based HR teams can stay in the dark about COBRA. Your American employees still trigger COBRA obligations when they leave, get divorced, or experience other qualifying events. Your local HR folks are often the first line of contact when these situations arise.
Global benefits with Pebl
COBRA compliance is complex enough when you're just dealing with U.S. employees. Add global expansion to the mix, and benefits administration becomes a whole new challenge. You're juggling federal requirements, state variations, tight deadlines, and the very real risk of penalties if something slips through the cracks.
Here's where Pebl comes in. While you're focused on growing your business globally, we help you navigate the complexity of international employment-from understanding local benefits requirements to ensuring your global workforce is properly supported. We can't make COBRA disappear, but we can help you build a benefits strategy that works across borders while you handle your U.S. obligations with confidence.
Ready to simplify your global benefits administration? Let's talk about how we can help you expand internationally without losing sleep over compliance complexities.
Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided "as is," and no representations are made that the content is error-free.
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