What Is COBRA – and How and When Do Employees Qualify?

October 16, 2023by mycalchoice

Federal law requires an option for employees to temporarily continue group health coverage in certain situations. The COBRA law applies to businesses with 20 or more employees. Are you complying with federal rules? What about the state-equivalent program for groups of 2-19 employees?

What is COBRA?

COBRA and Cal-COBRA let you maintain your employer-sponsored group health coverage when you leave your employer under certain circumstances. Watch this quick video to learn more about it.


COBRA and Cal-COBRA Coverage

Let’s take a look at COBRA and Cal-COBRA – and how employees qualify.

Groups of 2 to 19 Employees

Cal-COBRA lets employees maintain group health coverage when their job ends. It also applies when hours are reduced (and employee lose benefits eligibility). Cal-COBRA may also be available to employees have exhausted federal COBRA benefits. (See below.)

Through Cal-COBRA, employees may be able to extend their group health coverage up to 36 months.

Groups of 20 or More Employees

Federal COBRA offers employees a coverage extension of 18-36 months. If an employee qualifies for an 18-month extension, employees can get a second 18-month extension through Cal-COBRA.


COBRA requires continuation of benefits be offered to:

  • covered employees
  • former employees
  • spouses
  • former spouses, and
  • dependent children.

COBRA applies when group health coverage would otherwise be lost due to certain events, including:

  • A covered employee’s death
  • A covered employee’s job loss or reduction in hours for reasons other than gross misconduct
  • A covered employee’s becoming entitled to Medicare
  • A covered employee’s divorce or legal separation
  • A child’s loss of dependent status (and therefore coverage) under the plan.

COBRA sets rules for:

  • when plan sponsors must offer and provide continuation coverage
  • how employees and their families may elect continuation coverage, and
  • what circumstances justify terminating continuation coverage.

Employers may require individuals to pay for COBRA continuation coverage. Premiums cannot exceed the full cost of the coverage, plus a two percent administration charge.

What Plans Are Subject to COBRA?

COBRA applies to most private sector group health plans with at least 20 employees.

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. The fraction equals the number of hours worked divided by hours required to be full time.

For example, if Company A’s full-time employees work 40 hours per week, a part-time employee working 20 hours per week counts as half of a full-time employee. A part-time worker who works 16 hours per week counts as four-tenths of a full-time employee.

COBRA also applies to plans sponsored by state and local governments. However, it does not apply to the federal government or churches and certain church-related organizations. If you’re in doubt about whether COBRA applies to your business, refer to the DOL FAQs or your legal counsel.


If you offer group health benefits to employees and spouses, you must give a general notice describing COBRA rights. You can satisfy this requirement by including a general notice in your plan’s Summary Plan Description (SPD) distributed in the first 90 days of coverage.

After receiving a notice of a qualifying event, your group health plan or administrator must provide the qualified beneficiaries with an election notice within 14 days. The election notice describes rights to maintain insurance and how to make an election.

Read the DOL instructions on crafting your own notice. Or, for California groups of 2-19, download the California Department of Human Resources information on Cal-COBRA.

Talk With Your Carrier or Broker

Your insurance carrier, plan administrator, or broker can also help you with answers to COBRA and Cal-COBRA questions. Don’t hesitate to reach out to them. If you’re a CaliforniaChoice customer, you can contact Customer Service for assistance. Call 800-558-8003 or send an email to CustomerService@CalChoice.com.


Shopping for group health insurance?

This guide compiles a list of common questions you may have before you start offering health insurance coverage.