COBRA and Employer Options for Continuation Coverage

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AUI logo with Piggy Bank and Stethoscope signifying COBRA benefits


COBRA requires employers with twenty or more employees who offer health insurance benefits to provide Continuation Coverage in the event that an employee experiences a qualifying event that leads to the termination of their health insurance benefits. Read on to learn more about what Continuation Coverage is and how employers can remain compliant under COBRA’s coverage guidelines.

What is COBRA Continuation Coverage?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) passed in 1985 was designed to provide employees with uninterrupted health coverage as they navigated qualifying life events that caused their employer-provided health insurance to lapse. COBRA requires most group health insurance plans to offer a temporary continuation of health benefits that would otherwise be terminated due to certain events, including:

  • Loss of job or reduction in hours for reasons other than gross misconduct
  • Employee qualifying for Medicare
  • Employee’s divorce or legal separation
  • Child’s loss of dependent status (and coverage under their parent’s plan)
  • Employee death – causing the employee’s family to lose coverage

Both current and former employees, their current and former spouses, and dependent children are covered under continuation coverage benefits for a specified time that typically lasts for 18-36 months from the date of their loss of coverage.

Who is required to offer Continuation Coverage?

For the most part, COBRA requires all group health plans maintained by private-sector employers with 20 or more employees to offer Continuation Coverage. However, health plans sponsored by the Federal government or some private-sector employers, namely churches and certain church-related organizations, are not required to offer Continuation Coverage.

In addition to the coverage required on the federal level by COBRA, many states also have laws that apply to employers with fewer than 20 employees. These are sometimes called mini-COBRA laws. Be sure to check with your state’s Department of Insurance or your health insurance administrator to determine whether you are required to offer continuation coverage or if you are exempted from requiring it on a federal level.

What type of Continuation Coverage are employers required to provide?

Under the guidelines spelled out in COBRA, qualified employers must offer a group health plan that provides “medical care,” which includes:

  • Inpatient or outpatient hospital care
  • Physician care
  • Surgery or other major medical benefits
  • Prescription drugs
  • Dental & Vision coverage

Because life insurance and disability are not considered “medical care,” they are not required under COBRA’s Continuation Coverage requirements. Continuation Coverage benefits must be identical to the coverage offered to employees prior to the termination of benefits.

COBRA-covered health plans are governed by the Employee Retirement Income Security Act (ERISA), which doesn’t require employers to have specific group health plans or levels of benefits. However, it does require plans adhere to ERISA’s rules, which give participants and beneficiaries legally enforceable rights.

Maintaining COBRA Compliance

Under health plans subject to COBRA’s guidelines, qualified beneficiaries must be given the opportunity to elect COBRA Continuation Coverage after experiencing a qualifying event that would lead to an interruption in their health insurance benefits. Plan participants must also be given certain notices, including an initial notice when participation in the health plan begins as well as an election notice after a qualifying event.

AUI is a Trusted Local Partner for Employee Health Plans

As the cost and complexity of group health insurance continues to increase, it’s more challenging than ever for business leaders to find a company healthcare plan that’s both valuable and affordable, while maintaining compliance under COBRA and ERISA. AUI is here for you to ensure your company remains compliant under COBRA standards for continuation coverage benefits offered to your employees. When you choose AUI, you get a trusted local partner who is keenly focused on your coverage needs. Contact us today to learn more.


We do more than cover small businesses and individuals with the right insurance policies and benefit plans – what motivates our team is helping you save more so you can invest more in your team, family, and goals.

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