What is COBRA Compliance?

There is always that one topic HR leadershope won’t land on their desks. COBRA compliance tends to be exactly that.

But here’s the thing — it isn’t just another policy to skim over. It’s actually a federal law that could seriously impact a company’s finances and reputation if overlooked. In short, COBRA protects both employee rights and the rights of employers by setting the bar for how group health benefits work when interrupted due to “life happening”. COBRA continuation means giving former employees the chance to keep their group health benefits for a set period after they leave or lose active coverage.

Staying on top of this isn’t just a box to tick — it’s a way to protect your organization and keep people supported when they need it most.

The Consolidated Omnibus Budget Reconciliation Act — or COBRA, as most folks call it — was signed into law back in 1986. At its core, it gives workers and their families a way to keep their group health benefits for a limited time after certain qualifying events, like job loss or a big drop in work hours.

Instead of suddenly losing health coverage during an already stressful time, people get a chance to stay protected. For most employers, this law isn’t optional. It’s a legal obligation that comes with strict rules and timelines. Basically, it’s a safety net for employees — and a big responsibility for HR teams trying to juggle compliance without headaches.

Here’s where many employers pause and ask, “Does this even apply to us?” If you’ve got 20 or more employees on your group health plan, then yes, you’re on the hook for COBRA with few exempt organization types such as church organizations and government entities. It doesn’t matter if those employees are full-time or a mix of full- and part-time; if your headcount hits that mark, the law kicks in. Smaller businesses might need to look at state-level “mini-COBRA” laws instead, which have their own rules. In other words, mid-sized and large employers can’t ignore these obligations, and skipping them could open the door to big penalties later on.

Some exempt companies choose to comply with COBRA requirements even though they don’t have to, so that their employees will receive continuation benefits if there is a qualifying event. We work with churches, government organizations, and certain non-profits that offer COBRA continuation coverage because it is easier for them to do it and outsource it than to have their staff constantly lose group health benefits. 

At first glance, COBRA compliance might seem like just sending a notice or two, but there’s a bit more under the surface. Coverage must be offered when certain events happen — for example, an employee gets laid off, has work hours reduced, or experiences another qualifying event like divorce or the death of a covered employee. Once they’re eligible, those former employees (and their eligible dependents) have the right to continue their health plan for up to 18 or 36 months, depending on the situation.

Beyond just offering coverage, employers typically have to keep the plan identical to what active employees receive. That means no surprise changes or stripped-down benefits. The details might feel overwhelming at first, but these rules are there to make sure folks aren’t left scrambling for medical care when they’re already facing major life shifts.

Timelines trip up a lot of employers — and honestly, they can get confusing fast. Once a qualifying event happens, the employer has 30 days to notify the plan administrator. Then, the plan administrator usually has 14 days to send the COBRA election notice to the former employee (sometimes called the qualified beneficiary). In practice, though, many employers handle both steps together, so the full timeline can feel tight.

The election notice is a big deal — it tells the employee about their right to continue coverage, how long they have to decide, and what premiums they’ll owe. They typically get 60 days to choose.

Here’s a quick rundown of what must be included in those notices:

• Explanation of continuation rights
• Premium costs and payment schedules
• Coverage start and end dates
• Steps for electing coverage
• Consequences of waiving or dropping coverage
• Alternative coverage information (aka Marketplace options)

Missing any of these pieces or sending notices late isn’t just a paperwork error — it can lead to penalties and angry former employees. Staying organized and double-checking each deadline is more or less essential for avoiding headaches.

Mistakes with COBRA usually don’t happen because HR teams don’t care — it’s often because the requirements stack up fast and slip through the cracks. Missing a deadline is one of the biggest slip-ups. Sometimes, notices get buried in paperwork, or someone assumes “someone else took care of it.”

Another common issue? Sending incomplete or unclear notices. If an employee doesn’t understand their rights, that opens the door to disputes or even legal action.

Premium payments can be tricky, too. Mishandling payments — like failing to track grace periods or cutting off coverage too soon — can lead to serious compliance trouble.

All of these mistakes tend to pile on stress, create distrust, and set the stage for fines or lawsuits. That’s why so many HR teams decide they’d rather not shoulder it alone and start looking for a trusted partner who knows these rules inside and out.

Penalties for getting COBRA wrong aren’t small — they can really sting. The IRS can charge up to $100 per day per affected individual if an employer fails to meet notice obligations. If multiple employees are affected, those costs add up quickly and can spiral into the tens of thousands before you know it.

On top of the fines, there’s the risk of lawsuits. Former employees can sue for coverage losses or unexpected medical bills, which often come with legal fees and settlement costs.

Beyond the money, there’s another price: a damaged reputation. It’s tough to rebuild trust once employees or former team members feel neglected. So, staying compliant isn’t just about avoiding fines — it’s about protecting the whole organization’s standing and peace of mind.

Keeping up with COBRA rules might feel like juggling flaming pins — there’s a lot to watch, and dropping even one can cause trouble. One practical step is to use a detailed COBRA compliance checklist. This helps track deadlines, notice contents, and payment timelines all in one place.

Another smart move? Assign clear responsibility. Whether it’s an internal benefits specialist or a third-party administrator (TPA), someone needs to own COBRA from start to finish. That avoids the classic “I thought you handled it” problem that trips up so many teams.

Many HR leaders, especially after an audit scare, realize they don’t have the time or resources to manage this alone. That’s where partnering with a dedicated COBRA compliance specialist like CobraHelp comes in handy. They handle the messy details, so you can focus on supporting your current employees without worrying about fines or lawsuits lurking in the background.

These days, relying on spreadsheets and manual reminders is a bit like using a flip phone in a smartphone world. Automated systems and specialized software can track notices, deadlines, and payments in real-time, making mistakes a lot less likely.

Some employers choose to invest in software they manage in-house, but that still takes time and training. It is estimated that nearly 75% of companies in the U.S. have chosen to outsource to a COBRA compliance partner instead. A dedicated partner not only brings expertise but also offers a direct line of support when questions pop up.

With a specialist like CobraHelp, you get a smoother process, faster resolutions, and fewer angry calls from former employees. In other words, you can focus on bigger HR priorities, knowing your compliance is covered.

COBRA compliance might seem like a maze, but the risks of ignoring it are too big to gamble on.

By working with a trusted specialist like CobraHelp, you can avoid costly mistakes, protect your reputation, and breathe a little easier knowing everything is handled the right way.

Want a partner who already ticks the boxes?  Contact us to speak directly.