The Consolidated Omnibus 

Reconciliation Act of 1986

An Employer’s Guide 

to Group Health

Continuation Coverage

Under COBRA

U.S. Department of Labor

Employee Benefits Security Administration
This publication has been developed by the 

U.S. Department of Labor, Employee Benefits 

Security Administration. It is available on the 

agency’s Web site at: www.dol.gov/ebsa

For a complete list of EBSA publications, 

call the agency’s toll-free number: 

1-866-444-EBSA (3272).

This material will be made available in 

alternate format upon request:

Voice phone: (202) 693-8664

TTY: (202) 501-3911

This booklet constitutes a small entity compliance guide for purposes of

the Small Business Regulatory Enforcement Fairness Act of 1996.
U.S. Department of Labor

Employee Benefits Security Administration

September 2004

The Consolidated Omnibus 

Reconciliation Act of 1986

An Employer’s Guide 

to Group Health

Continuation Coverage

Under COBRA
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

WHAT IS COBRA CONTINUATION COVERAGE? . . . . . . . . . . . .2

WHO IS ENTITLED TO CONTINUATION COVERAGE? . . . . . . . . .5

COBRA NOTICE AND ELECTION PROCEDURES . . . . . . . . . . . . . . .7

BENEFITS UNDER CONTINUATION COVERAGE . . . . . . . . . . . . .13

DURATION OF CONTINUATION COVERAGE . . . . . . . . . . . . . . . .14

SUMMARY OF QUALIFYING EVENTS, QUALIFIED 

BENEFICIARIES, AND MAXIMUM PERIODS OF 

CONTINUATION COVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

PAYING FOR CONTINUATION COVERAGE . . . . . . . . . . . . . . . . .19

COORDINATION WITH OTHER FEDERAL BENEFIT LAWS . . . . . . .21

ROLE OF THE FEDERAL GOVERNMENT . . . . . . . . . . . . . . . . . . . . .23

RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

CONTENTS
1

Health insurance is one of the most important benefits that employers

can provide for their employees. Employers that sponsor group health

plans enable their employees and their families to take care of their

essential medical needs, ensuring that they can devote their energies to

productive work. Because of the critical importance of good health,

employer-sponsored group health insurance programs benefit

employees, employers, and society as a whole.

Most group health plans sponsored by employers must comply with

the Employee Retirement Income Security Act of 1974 (ERISA), a

Federal law that sets standards to protect employee benefits. One of

the protections contained in ERISA is the right to COBRA

continuation coverage, a temporary continuation of group health

coverage that would otherwise be lost due to life events like

termination of employment, death of an employee, and divorce.

This booklet summarizes COBRA continuation coverage and explains

the rules that apply to group health plans. It is intended to assist

employers that sponsor group health plans to comply with this

important Federal law.

INTRODUCTION
2

COBRA

Congress passed the landmark Consolidated Omnibus Budget

Reconciliation Act (COBRA)

1 health benefit provisions in 1986. The

law amended the Employee Retirement Income Security Act (ERISA),

the Internal Revenue Code and the Public Health Service Act to

require most group health plans to provide a temporary continuation

of group health coverage that otherwise might be terminated.

Group Health Plans Subject to COBRA

COBRA generally applies to all private-sector group health plans

maintained by employers that have at least 20 employees on more

than 50 percent of its typical business days in the previous calendar

year. Both full- and part-time employees are counted to determine

whether a plan is subject to COBRA. Each part-time employee counts

as a fraction of a full-time employee, with the fraction equal to the

number of hours that the part-time employee worked divided by the

hours an employee must work to be considered full time.

COBRA also applies to plans sponsored by state and local

governments.2 The law does not apply, however, to plans sponsored

by the Federal government or by churches and certain church-related

organizations.

What is a group health plan? It is any arrangement that an employer

establishes or maintains to provide employees or their families with

medical care, whether it is provided through insurance, by a health

maintenance organization, out of the employer’s assets, or through any

other means. “Medical care” includes for this purpose:

WHAT IS COBRA CONTINUATION COVERAGE?

1The original health continuation provisions were contained in Title X of COBRA, which was 

signed into law (Pub. L. No. 99-272) on April 7, 1986.

2The COBRA provisions of the Public Health Service Act covering state and local government 

plans are administered by the Department of Health and Human Services under the provisions of 

the Public Health Service Act.
3

● Inpatient and outpatient hospital care;

● Physician care;

● Surgery and other major medical benefits;

● Prescription drugs;

● Dental and vision care.

Life insurance is not considered “medical care,” nor are disability

benefits; and COBRA does not cover plans that provide only life

insurance or disability benefits.

Group health plans covered by COBRA that are sponsored by privatesector employers are generally welfare plans under ERISA and therefore

subject to ERISA’s other requirements. Under ERISA, group health

plans must be administered by a plan administrator, who is usually

named in the plan documents. Many group health plans are

administered by the employer that sponsors the plan, but group health

plans are also frequently administered, in whole or in part, by another

individual or organization separate from the employer, such as a

professional benefits administration firm. Carrying out the requirements

of COBRA is the direct responsibility of the plan administrator. 

COBRA Continuation Coverage

COBRA requires group health plans to offer continuation coverage to

covered employees, former employees, spouses, former spouses, and

dependent children when group health coverage would otherwise be

lost due to certain specific events. Those events include the death of a

covered employee, termination or reduction in the hours of a covered

employee’s employment for reasons other than gross misconduct, a

covered employee’s becoming entitled to Medicare, divorce or legal

separation of a covered employee and spouse, and a child’s loss of

dependent status (and therefore coverage) under the plan. COBRA

sets rules for how and when continuation coverage must be offered

and provided, how employees and their families may elect

continuation coverage, and what circumstances justify terminating

continuation coverage.
4

Employers may require individuals to pay for COBRA continuation

coverage. The premium that is charged cannot exceed the full cost of

the coverage, plus a 2 percent administration charge. 

Alternatives to COBRA Continuation Coverage 

Those entitled to elect COBRA continuation coverage may have

alternative options to COBRA coverage. One option may be “special

enrollment” in other group health coverage. Under the Health

Insurance Portability and Accountability Act (HIPAA), upon certain

events, group health plans, and health insurance issuers are required to

provide a special enrollment period during which individuals who

previously declined coverage for themselves and their dependents, and

who are otherwise eligible, may be allowed to enroll without having to

wait until the next open season for enrollment. One event that triggers

special enrollment is an employee or dependent of an employee losing

eligibility for other health coverage. For example, an employee who

loses group health coverage may be able to special enroll in a spouse’s

health plan. The employee or dependent must request special

enrollment within 30 days of the loss of coverage. 

If an employee or dependent chooses to elect COBRA instead of

special enrollment upon a loss of group health coverage, the employee

or dependent will have another opportunity to request special

enrollment once COBRA has been exhausted. In order to exhaust

COBRA coverage, the individual must receive the maximum period of

COBRA coverage available without early termination. To special

enroll after exhausting COBRA, an individual must request enrollment

within 30 days of the loss of COBRA coverage. 

In addition, individuals in a family may be eligible for health

insurance coverage through various state programs. For more

information contact your state department of insurance.
5

A group health plan is required to offer COBRA continuation

coverage only to qualified beneficiaries and only after a qualifying

event has occurred.

Qualified Beneficiaries

A qualified beneficiary is an individual who was covered by a group

health plan on the day before a qualifying event occurred and who is

either an employee, the employee’s spouse or former spouse, or the

employee’s dependent child. In certain cases involving the

bankruptcy of the employer, a retired employee, the retired employee’s

spouse (or former spouse), and the retired employee’s dependent

children may be qualified beneficiaries. In addition, any child born to

or placed for adoption with a covered employee during a period of

continuation coverage is automatically considered a qualified

beneficiary. Agents, independent contractors, and directors who

participate in the group health plan may also be qualified

beneficiaries.

Qualifying Events

“Qualifying events” are events that cause an individual to lose group

health coverage. The type of qualifying event determines who the

qualified beneficiaries are for that event and the period of time that a

plan must offer continuation coverage. COBRA establishes only the

minimum requirements for continuation coverage. A plan may always

choose to provide longer periods of continuation coverage.

The following are qualifying events for a covered employee if they

cause the covered employee to lose coverage:

● Termination of the covered employee’s employment for any 

reason other than “gross misconduct”; or

● Reduction in the covered employee’s hours of employment.

WHO IS ENTITLED TO CONTINUATION COVERAGE?
6

The following are qualifying events for a spouse and dependent child

of a covered employee if they cause the spouse or dependent child to

lose coverage:

● Termination of the covered employee’s employment for any 

reason other than “gross misconduct”;

● Reduction in hours worked by the covered employee;

● Covered employee becomes entitled to Medicare;

● Divorce or legal separation of the spouse from the covered 

employee; or

● Death of the covered employee.

In addition to the above, the following is a qualifying event for a

dependent child of a covered employee if it causes the child to lose

coverage:

● Loss of “dependent child” status under the plan rules.
7

Under COBRA, group health plans must provide covered employees

and their families with specific notices explaining their COBRA

rights. They must also have rules for how COBRA continuation

coverage is offered, how qualified beneficiaries may elect continuation

coverage, and when it can be terminated. 

Notice Procedures

Summary Plan Description

The COBRA rights provided under the plan, like other important plan

information, must be described in the plan’s summary plan description

(SPD). The SPD is a written document that gives important

information about the plan, including what benefits are available

under the plan, the rights of participants and beneficiaries under the

plan, and how the plan works. ERISA requires group health plans to

give each participant an SPD within 90 days after he or she first

becomes a participant in a plan (or within 120 days after the plan is

first subject to the reporting and disclosure provisions of ERISA). In

addition, if there are material changes to the plan, the plan must give

participants a summary of material modifications (SMM) not later

than 210 days after the end of the plan year in which the changes

become effective. If the change is a material reduction in covered

services or benefits, the SMM must be furnished not later than 60 days

after the reduction is adopted. A participant or beneficiary covered

under the plan may request a copy of the SPD and any SMMs (as well

as any other plan documents), which must be provided within 30 days

of a written request.

COBRA General Notice

Group health plans must give each employee and each spouse of an

employee who becomes covered under the plan a general notice

describing COBRA rights. The general notice must be provided

within the first 90 days of coverage. Group health plans can satisfy

this requirement by including the general notice in the plan’s SPD

and giving the SPD to the employee and to the spouse within this

time limit. 

COBRA NOTICE AND ELECTION PROCEDURES
8

The general notice must include:

● The name of the plan and the name, address, and telephone 

number of someone whom the employee and spouse can contact 

for more information on COBRA and the plan;

● A general description of the continuation coverage provided under

the plan;

● An explanation of what qualified beneficiaries must do to notify 

the plan of qualifying events or disabilities;

● An explanation of the importance of keeping the plan 

administrator informed of addresses of the participants and 

beneficiaries; and

● A statement that the general notice does not fully describe 

COBRA or the plan and that more complete information is 

available from the plan administrator and in the SPD.

The Department of Labor has developed a model general notice that

single-employer group health plans may use to satisfy the general

notice requirement. It is available at the EBSA Web site at

www.dol.gov/ebsa. In order to use this model general notice properly,

the plan administrator must complete it by filling in the blanks with

the appropriate plan information. Use of the model general notice,

appropriately completed, will be considered by the Department to be

good faith compliance with the general notice content requirements of

COBRA.

COBRA Qualifying Event Notice

Before a group health plan must offer continuation coverage, a qualifying

event must occur. The group health plan is not required to act until it

receives an appropriate notice of such a qualifying event. 

The employer is required to notify the plan if the qualifying event is:

● Termination or reduction in hours of employment of the covered 

employee;

● Death of the covered employee; or

● Covered employee’s becoming entitled to Medicare.
9

The employer has 30 days after the event occurs to provide notice to

the plan. 

The covered employee or one of the qualified beneficiaries is

responsible for notifying the plan if the qualifying event is:

● Divorce;

● Legal separation; or 

● A child’s loss of dependent status under the plan. 

Group health plans are required to have procedures for how the

covered employee or one of the qualified beneficiaries can provide

notice of these types of qualifying event. The procedures must give

covered employees and qualified beneficiaries at least 60 days after

the qualifying event occurs to give notice, and the procedures must

describe how, and to whom, notice should be given, and what

information must be included in the qualifying event notice. If one

person gives notice of a qualifying event, the notice covers all

qualified beneficiaries affected by that event. 

If a group health plan does not have reasonable procedures for how to

provide these notices, qualified beneficiaries are permitted to give

notice (either written or oral) to the person or unit that handles the

employer’s employee benefits matters. If the plan is a multiemployer

plan, notice can also be given to the joint board of trustees; and if the

plan is administered by an insurance company (or the benefits are

provided through insurance), notice can be given to the insurance

company.

COBRA Election Notice

After receiving a notice of a qualifying event, the plan must provide

the qualified beneficiaries with an election notice, which describes

their rights to continuation coverage and how to make an election.

The election notice must be provided to the qualified beneficiaries

within 14 days after the plan administrator receives the notice of a

qualifying event. 
10

The election notice must include:

● The name of the plan and the name, address, and telephone 

number of the plan’s COBRA administrator;

● Identification of the qualifying event;

● Identification of the qualified beneficiaries (by name or by status);

● An explanation of the qualified beneficiaries’ right to elect 

continuation coverage;

● The date coverage will terminate (or has terminated) if 

continuation covered is not elected;

● How to elect continuation coverage;

● What will happen if continuation coverage isn’t elected or is 

waived;

● What continuation coverage is available, for how long, and (if it 

is for less than 36 months), how it can be extended for disability 

or second qualifying events; 

● How continuation coverage might terminate early;

● Premium payment requirements, including due dates and grace 

periods;

● A statement of the importance of keeping the plan administrator 

informed of the addresses of qualified beneficiaries; and

● A statement that the election notice does not fully describe 

COBRA or the plan and that more information is available from 

the plan administrator and in the SPD.

The Department has developed a model election notice that plans may

use to satisfy their obligation to provide the election notice. The

model election notice is available on the EBSA Web site at

www.dol.gov/ebsa. In order to use this model election notice

properly, the plan administrator must complete it by filling in the

blanks with the appropriate plan information. Use of the model

election notice, appropriately completed, will be considered by the

Department to be good faith compliance with the election notice

content requirements of COBRA.
11

COBRA Notice of Unavailability of Continuation Coverage

Group health plans may sometimes deny a request for continuation

coverage or for an extension of continuation coverage, when the plan

determines the requester is not entitled to receive it. When a group

health plan makes the decision to deny a request for continuation

coverage from an individual, the plan must give the individual a notice

of unavailability of continuation coverage. The notice must be

provided within 14 days after the request is received, and the notice

must explain the reason for denying the request.

COBRA Notice of Early Termination of Continuation Coverage

Continuation coverage must generally be made available for a

maximum period (18, 29, or 36 months). The group health plan may

terminate continuation coverage early, however, for any of a number

of specific reasons. (See Duration of Continuation Coverage later in

this booklet.) When a group health plan decides to terminate

continuation coverage early for any of these reasons, the plan must

give the qualified beneficiary a notice of early termination. The notice

must be given as soon as practicable after the decision is made, and it

must describe the date coverage will terminate, the reason for

termination, and any rights the qualified beneficiary may have under

the plan or applicable law to elect alternative group or individual

coverage, such as a right to convert to an individual policy. 

Special Rules for Multiemployer Plans

Multiemployer plans are allowed to adopt some special rules for

COBRA notices. First, a multiemployer plan may adopt its own

uniform time limits for the qualifying event notice or the election

notice. A multiemployer plan also may choose not to require

employers to provide qualifying event notices, and instead to have the

plan administrator determine when a qualifying event has occurred.

Any special multiemployer plan rules must be set out in the plan’s

documents (and SPD).

Election Procedures

COBRA requires group health plans to give qualified beneficiaries an

election period during which they can decide whether to elect
12

continuation coverage, and COBRA also gives qualified beneficiaries

specific election rights.

At a minimum, each qualified beneficiary must be given at least 60

days to choose whether or not to elect COBRA coverage, beginning

from the later of the date the election notice is provided, or the date on

which the qualified beneficiary would otherwise lose coverage under

the group health plan due to the qualifying event.

Each qualified beneficiary must be given an independent right to elect

continuation coverage. This means that when several individuals 

(such as an employee, his or her spouse, and their dependent children)

become qualified beneficiaries due to the same qualifying event, each

individual can make a different choice. The plan must allow the

covered employee or the covered employee’s spouse, however, to elect

continuation coverage on behalf of all of the other qualified

beneficiaries for the same qualifying event. A parent or legal guardian

of a qualified beneficiary must also be allowed to elect on behalf of a

minor child. 

If a qualified beneficiary waives continuation coverage during the

election period, he or she must be permitted to later revoke the waiver

of coverage and elect continuation coverage, as long as the revocation

is done before the end of the election period. If a waiver is later

revoked, however, the plan is permitted to make continuation coverage

begin on the date the waiver was revoked.
13

COBRA also sets standards for the continuation coverage that must be

provided. 

The continuation coverage must be identical to the coverage that is

currently available under the plan to similarly situated individuals who

are covered under the plan and not receiving continuation coverage.

(Generally, this is the same coverage that the qualified beneficiary had

immediately before the qualifying event). A qualified beneficiary

receiving continuation coverage must receive the same benefits,

choices, and services that a similarly situated participant or

beneficiary is currently receiving under the plan, such as the right

during an open enrollment season to choose among available coverage

options. The qualified beneficiary is also subject to the same plan

rules and limits that would apply to a similarly situated participant or

beneficiary, such as co-payment requirements, deductibles, and

coverage limits. The plan’s rules for filing benefit claims and

appealing any claims denials also apply. 

Any changes made to the plan’s terms that apply to similarly situated

active employees and their families will also apply to qualified

beneficiaries receiving COBRA continuation coverage. If a child is

born to or adopted by a covered employee during a period of

continuation coverage, the child is automatically considered to be a

qualified beneficiary receiving continuation coverage. The plan must

allow the child to be added to the continuation coverage.

BENEFITS UNDER CONTINUATION COVERAGE
14

Maximum Periods

COBRA requires that continuation coverage be made available for a

limited period of time of 18 or 36 months. The length of time for which

continuation coverage must be made available (the “maximum period”

of continuation coverage) depends on the type of qualifying event that

gave rise to the COBRA rights. A plan, however, may provide longer

periods of coverage beyond the maximum period required by law. 

When the qualifying event is the covered employee’s termination of

employment (for reasons other than gross misconduct) or reduction in

hours of work, qualified beneficiaries must be provided a maximum of

18 months of continuation coverage. 

For all other qualifying events, qualified beneficiaries must be

provided 36 months of continuation coverage.3

Early Termination

A group health plan may terminate continuation coverage earlier than

the end of the maximum period for any of the following reasons:

● Premiums are not paid in full on a timely basis;

● The employer ceases to maintain any group health plan;

● A qualified beneficiary begins coverage under another group 

health plan after electing continuation coverage (as long as that 

plan doesn’t impose an exclusion or limitation with respect to a 

preexisting condition of the qualified beneficiary);

● A qualified beneficiary becomes entitled to Medicare benefits 

after electing continuation coverage;

DURATION OF CONTINUATION COVERAGE

3Under COBRA, certain retirees and their family members who receive post-retirement health 

coverage from employers have special COBRA rights in the event that the employer is involved in 

bankruptcy proceedings begun on or after July 1, 1986. This booklet does not fully describe the 

COBRA rights of that group.
15

● A qualified beneficiary engages in conduct that would justify the 

plan in terminating coverage of a similarly situated participant or 

beneficiary not receiving continuation coverage (such as fraud).

If continuation coverage is terminated early, the plan must provide the

qualified beneficiary with an early termination notice. (See Notice

and Election Procedures earlier in this booklet.)

Extension of an 18-month Period of Continuation

Coverage

There are two circumstances under which individuals entitled to an

18-month maximum period of continuation coverage can become

entitled to an extension of that maximum. The first is when one of the

qualified beneficiaries is disabled; the second is when a second

qualifying event occurs.

Disability

If one of the qualified beneficiaries in a family is disabled and meets

certain requirements, all of the qualified beneficiaries in that family

are entitled to an 11-month extension of the maximum period of

continuation coverage (for a total maximum period of 29 months of

continuation coverage). The plan can charge qualified beneficiaries an

increased premium, up to 150 percent of the cost of coverage, during

the 11-month disability extension. 

The requirements are, first, that the disabled qualified beneficiary

must be determined by the Social Security Administration (SSA) to be

disabled at some point during the first 60 days of continuation

coverage, and, second, that the disability must continue during the rest

of the initial 18-month period of continuation coverage. 

The disabled qualified beneficiary (or another person on his or her

behalf) must also notify the plan of the SSA determination. The plan

can set a time limit for providing this notice of disability, but the time

limit cannot be shorter than 60 days, starting from the latest of: (1) the
16

date on which the SSA issues the disability determination; (2) the date

on which the qualifying event occurs; or (3) the date on which the

qualified beneficiary receives the COBRA general notice. 

The right to a disability extension may be terminated if SSA

determines that the qualified beneficiary is no longer disabled, and the

plan can require disabled qualified beneficiaries to provide notice

when such a determination is made. The plan must give the qualified

beneficiaries at least 30 days after the SSA determination in which to

provide such notice.

The rules for how to give a disability notice and a notice of no longer

being disabled should be described in the plan’s SPD (and in the

election notice for any offer of an 18-month period of continuation

coverage). 

Second Qualifying Event

An 18-month extension may be available to qualified beneficiaries

receiving an 18-month maximum period of continuation coverage

(giving a total maximum period of 36 months of continuation

coverage) if the qualified beneficiaries experience a second qualifying

event that is death of the covered employee, divorce or legal

separation of the covered employee and spouse, Medicare entitlement,

or loss of dependent child status under the plan. The second event can

be a second qualifying event only if it would have caused the qualified

beneficiary to lose coverage under the plan in the absence of the first

qualifying event. The plan should have rules for how a notice of

second qualifying event should be provided, and these rules should be

described in the plan’s SPD (and in the election notice for any offer of

an 18-month period of continuation coverage).

Conversion Options

Some group health plans contain a conversion option, which allows

participants and beneficiaries whose coverage under the plan

terminates to convert from group health coverage to an individual

policy. If this conversion option is available under the plan to active
17

employees and their families, qualified beneficiaries whose maximum

period of continuation coverage ends also must be given the option to

convert to an individual policy. The conversion option must be

offered not later than 180 days before continuation coverage ends.

The option to convert, however, need not be provided if continuation

coverage is terminated before the end of the maximum period for

which it was made available.
The following chart shows the maximum period for which

continuation coverage must be offered for the specific qualifying

events and the qualified beneficiaries who are entitled to elect

continuation coverage when the specific event occurs. Note that an

event is a qualifying event only if it causes the qualified

beneficiary to lose coverage under the plan.

18

SUMMARY OF QUALIFYING EVENTS, QUALIFIED

BENEFICIARIES, AND MAXIMUM PERIODS OF

CONTINUATION COVERAGE

QUALIFYING EVENT QUALIFIED MAXIMUM PERIOD

BENEFICIARIES OF CONTINUATION 

COVERAGE

Termination (for reasons Employee 18 months4

other than gross misconduct) Spouse

or reduction in hours of Dependent Child

employment 

Employee enrollment in Spouse 36 months

Medicare Dependent Child

Divorce or legal separation Spouse 36 months

Dependent Child

Death of employee Spouse 36 months

Dependent Child

Loss of “dependent child” Dependent Child 36 months

status under the plan

4 In certain circumstances, qualified beneficiaries entitled to18 months of continuation coverage 

may become entitled to a disability extension of an additional 11 months (for a total maximum of 

29 months) or an extension of an additional 18 months due to the occurrence of a second 

qualifying event (for a total maximum of 36 months) (See Duration of Continuation Coverage

earlier in this booklet.)
19

Group health plans can require qualified beneficiaries to pay for

COBRA continuation coverage, although plans can choose to provide

continuation coverage at reduced or no cost. The maximum amount

charged to qualified beneficiaries cannot exceed 102 percent of the

cost to the plan for similarly situated individuals covered under the

plan who have not incurred a qualifying event. In calculating

premiums for continuation coverage, a plan can include the costs paid

by both the employee and the employer, plus an additional 2 percent

for administrative costs. All of the necessary information about

COBRA premiums, when they are due, and the consequences of

payment and nonpayment should be described in the COBRA election

notice. For disabled qualified beneficiaries receiving the 11-month

disability extension of continuation coverage, the premium for those

additional months may be increased to 150 percent of the plan’s total

cost of coverage.

COBRA charges to qualified beneficiaries may be increased if the cost

to the plan increases but generally must be fixed in advance of each

12-month premium cycle. The plan must allow qualified beneficiaries

to pay the required premiums on a monthly basis if they ask to do so,

and may allow payments at other intervals (for example, weekly or

quarterly).

Qualified beneficiaries cannot be required to pay a premium in

connection with making the COBRA election. Plans must provide at

least 45 days after the election (that is the date the qualified

beneficiary mails the election form if using first-class mail), for

making an initial premium payment. If a qualified beneficiary fails to

make any payment before the end of the initial 45-day period, the plan

can terminate the qualified beneficiary’s COBRA rights. The plan

should establish due dates for any premiums for subsequent periods of

coverage, but must provide a minimum 30-day grace period for each

payment. 

Plans are permitted to terminate continuation coverage if full payment

is not received before the end of a grace period. If the amount of a

payment made to the plan is wrong, but is not significantly less than

PAYING FOR CONTINUATION COVERAGE
20

the amount due, the plan must notify the qualified beneficiary of the

deficiency and grant a reasonable period (for this purpose, 30 days is

considered reasonable) to pay the difference. The plan is not

obligated to send monthly premium notices, but is required to provide

a notice of early termination if continuation coverage is terminated

early due to failure to make a timely payment.

Certain individuals may be eligible for a Federal income tax credit

that can alleviate the financial burden of monthly COBRA premium

payments. The Trade Adjustment Assistance Reform Act of 2002

(Trade Act of 2002) created the Health Coverage Tax Credit (HCTC),

an advanceable, refundable tax credit for up to 65 percent of the

premiums paid for specified types of health insurance coverage

(including COBRA continuation coverage). The HCTC is available to

certain workers who lose their jobs due to the effects of international

trade and who qualify for trade adjustment assistance (TAA), as well

as certain individuals who are receiving pension payments from the

Pension Benefit Guaranty Corporation (PBGC). Individuals who are

eligible for the HCTC may choose to have the amount of the credit

paid on a monthly basis to their health coverage provider as it

becomes due, or may claim the tax credit on their income tax returns

at the end of the year. For more information about the Health

Coverage Tax Credit, call the HCTC Customer Contact Center at 

1-866-628-HCTC (4282) (TDD/TYY: 1-866-626-HCTC (4282)). 

You may also visit the HCTC Web site at www.irs.gov by entering 

the keyword: “HCTC.” 
21

The Family and Medical Leave Act (FMLA) requires an employer to

maintain coverage under any “group health plan” for an employee on

FMLA leave under the same conditions coverage would have been

provided if the employee had continued working. Group health

coverage that is provided under the FMLA during a family or medical

leave is NOT COBRA continuation coverage, and taking FMLA leave

is not a qualifying event under COBRA. A COBRA qualifying event

may occur, however, when an employer’s obligation to maintain

health benefits under FMLA ceases, such as when an employee taking

FMLA leave decides not to return to work and notifies an employer of

his or her intent not to return to work.

HIPAA requires that a group health plan or health insurance issuer

provide a certificate of health coverage automatically to individuals

entitled to elect COBRA continuation coverage, at a time no later than

when a notice is required to be provided for a qualifying event under

COBRA, and to individuals who elected COBRA coverage, either

within a reasonable time after learning that the COBRA coverage has

ceased, or within a reasonable time after the end of the grace period

for payment of COBRA premiums. 

Under HIPAA, upon certain events, group health plans and health

insurance issuers are required to provide a special enrollment period

during which an individual who previously declined coverage for

themselves and/or their dependents may be allowed to enroll without

having to wait until the next open season for enrollment, regardless of

whether the plan has an open season or when the next open season

begins. When an employee or dependent of an employee loses

eligibility for other health coverage, a special enrollment right may be

triggered. If the other health coverage was COBRA, special

enrollment can be requested only after COBRA is exhausted.

Finally, under HIPAA any preexisting condition exclusion period that

would apply under a group health plan or group health insurance

coverage generally is reduced by an individual’s number of days of

creditable coverage that occurred without a break in coverage of 63

days or more. For this purpose, most health coverage, including

COBRA coverage, is creditable coverage. 

COORDINATION WITH OTHER FEDERAL BENEFIT LAWS
22

The Trade Act of 2002 also amended COBRA to provide certain

workers who lose their jobs due to the effects of international trade

and who qualify for trade adjustment assistance (TAA) with a second

opportunity to elect COBRA continuation coverage. For more

information about the operation and scope of the second COBRA

election opportunity created by the Trade Act, call the HCTC

Customer Contact Center at 1-866-628-HCTC (4282) (TDD/TTY: 

1-866-626-HCTC (4282)). You may also visit the HCTC Web site 

on-line at www.irs.gov by entering the keyword: “HCTC.”
23

COBRA continuation coverage laws are administered by several

agencies. The Departments of Labor and the Treasury have

jurisdiction over private-sector group health plans. The Department of

Health and Human Services administers the continuation coverage law

as it affects State and local government health plans. 

The Labor Department’s interpretive responsibility for COBRA is

limited to the disclosure and notification requirements of COBRA.

The Labor Department has issued regulations on the COBRA notice

provisions. The Treasury Department has interpretive responsibility to

define the required continuation coverage. The Internal Revenue

Service, Department of the Treasury, has issued regulations on

COBRA provisions relating to eligibility, coverage, and payment.

The Departments of Labor and the Treasury share jurisdiction for

enforcement of these provisions.

ROLE OF THE FEDERAL GOVERNMENT
24

If you need further information about COBRA, ERISA, or HIPAA,

call (toll free) 1-866-444-EBSA (3272) to reach the Employee

Benefits Security Administration regional office nearest you, or visit

the agency’s Web site at www.dol.gov/ebsa. 

For information about the interaction of COBRA and HIPAA, visit 

the EBSA Web site and click on Publications/Reports, then the

publication Compliance Assistance Guide, Recent Changes in Health 

Care Law.

Further information on FMLA is available from the nearest office of

the Wage and Hour Division, listed in most telephone directories

under U.S. Government, Department of Labor, Employment Standards

Administration.

For questions about eligibility for the TAA tax credit for qualified

health insurance coverage, call the HCTC Customer Contact Center

(toll free) at 1-866-628-HCTC (4282) (TDD/TTY: 1-866-626-HCTC

(4282)). You may also visit the HCTC Web site at www.irs.gov by

entering the keyword “HCTC.” 

RESOURCES