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Which employees must be offered COBRA?

Individuals that are “qualified beneficiaries” must be offered health care continuation through COBRA when they experience a qualifying event. According to the U.S. Department of Labor, a qualified beneficiary is:

[A]n employee who was covered by a group health plan on the day before a qualifying event occurred or that employee's spouse, former spouse, or dependent child. In certain cases involving employer bankruptcy, a retired employee and their spouse, former spouse, or 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. An employer’s agents, independent contractors, and directors who participate in the group health plan may also be qualified beneficiaries.

When determining whether or not an employee is a qualified beneficiary, keep the following in mind:

  • If the employee was covered under the group health plan the day before the qualifying event, the employee and their dependents will be eligible for COBRA regardless of whether the employee voluntarily resigned or was involuntarily terminated.
  • When a covered employee is terminated for gross misconduct, COBRA does not have to be offered to either the employee or their dependents. However, as the regulations do not define “gross misconduct”, it is best to reserve this option to deny coverage for cases of extreme misconduct and have your attorney review the situation for compliance.
  • Eligibility for COBRA is not based on how long an employee has been with the company or how long he or she has been covered under the group health care plan. If the employee is enrolled in the plan and benefits coverage has begun, he or she will be eligible for COBRA continuation coverage in the event of a qualifying event, even if the employee has worked for the employer for only a short time.  

While federal COBRA only applies to employers with 20 or more employees, state laws often require continuation coverage for smaller employers. 


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