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Who does COBRA apply to?

Updated: Apr 21, 2023

Whether you’re the head of a small business or leader of a large organization, one question many employers ask us is who does COBRA insurance apply to or, more directly, who has to offer COBRA?

COBRA generally refers to a requirement on employers to provide employees with the opportunity to continue their group health coverage for up to 18 months following a qualifying event. In some cases, COBRA continuation coverage can even be extended for up to 36 months. But before we get into qualifying events and applicability or longevity of COBRA, it’s important to first answer:

What is COBRA?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) was enacted in 1986 and functions as a government-mandated insurance program. It offers the continuation of group health coverage to employees and their families who might otherwise lose that coverage due to certain "qualifying events."

These qualifying events could include:

· The termination or reduction in hours worked

· The death of the employee

· The divorce or legal separation from the covered employee

· A child ceasing to be a dependent under the terms of the plan

Which Employers Need to Offer COBRA?

If you’re a private sector employer who maintains “group health plans” for 20 or more employees, or you work within the state and local governments, there is a law mandating the use of COBRA.

However, within that, there is a little nuance. If you’re an employer hovering right around 20 employees, making the determination for COBRA applicability can take a couple of extra steps.

How Do You Determine COBRA Applicability?

If you have 20 employees – that is, the total employees including part-time which can be counted, in some instances, as a fraction of an employee – on at least 50% of business days on the prior calendar year, then you would be subject to COBRA. To better determine that 50%, it’s important to understand that the part-time employee fraction is typically the number of hours they actually worked, divided by the hours they would need to work to be considered full-time.

Keep in mind, this determination comes regardless of how many employees are on the actual group health plan, or when the “plan year” actually starts. For example, if the plan year is April 1st, you still need to look at the prior calendar year when making your determination. With that said, if you feel you or your clients are teetering on the borderline, be aware of those dates and employee numbers to see who is subject to COBRA or perhaps even a continuation.

Ask the Experts at BCS

Employees who are covered by COBRA are typically those who have left their jobs voluntarily or involuntarily due to termination, layoff, or even reduction. If that situation applies to your clients, or you’re an employer with further questions about COBRA insurance, who it applies to, and who benefits from it – reach out to us to discuss practical solutions and any other compliance needs.

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