There are many important nuances, but basically the Consolidated Omnibus Budget Reconciliation Act of 1985, “COBRA,” is a federal law that requires employers with at least 20 employees who sponsor a health plan to offer employees and their eligible family members the option to continue benefits for limited periods of time when coverage would otherwise end due to certain qualifying events (e.g., reduction in hours or cessation of employment, death of the covered employee, employee’s entitlement to Medicare, divorce or legal separation from the covered employee, or loss of dependent child status).

COBRA requires two specific Notices to employees: 1. An initial General Notice informing employees and spouses of their general rights to continuation coverage which must be provided within the first 90 days of coverage; and 2. An Election Notice to qualified beneficiaries providing their rights and obligations with reference to a specific qualifying event.

Employers must generally notify their plan administrator (if the employer is not the administrator) within 30 days of the occurrence of a qualifying event. The Election Notice must be provided to the qualified beneficiaries within 14 days of the plan administrator receiving notice of the qualifying event.

Potential Snakebite: There has been a significant amount of litigation involving employers and COBRA fairly recently. Most of the cases involve allegations that the employer failed to provide the General Notice and/or the Election Notice in a timely manner, and/or whether the contents of the Notices were adequate.

Such suits carry the potential for large damages, including: statutory penalties of $110 a day; attorney fees; and all amounts that the qualified beneficiary incurred as a result of no (or a deficient) Notice. This can include medical expenses, and replacement medical insurance costs. As with many cases these days, COBRA related lawsuits are often class actions. A  class action suit in Texas settled for $1,000,000 in 2015.

Employers subject to COBRA should review their compliance procedures.

Skip to content