​COBRA & Cal-COBRA: Continuation Coverage

​

When employees leave or their hours are cut, losing health coverage shouldn't be one more worry. Federal and California law both give employees and their families the right to keep their group health coverage for a while. Which law applies depends on how many people you employ.

Which one applies to you?

• 20 or more employees - Federal COBRA

• 2–19 employees (with an insured group health plan) - Cal-COBRA

• Federal COBRA enrollees whose 18 months are ending: Cal-COBRA may extend their coverage up to 36 months in total

 

Federal COBRA

​

The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires employers to offer employees and their dependents the option to keep their health coverage after certain qualifying events.

• Who must comply - Employers with 20 or more employees that offer a group health plan.

• Qualifying events - Termination of employment, reduction in hours, divorce, legal separation, the employee's death, Medicare entitlement, or a dependent aging out of coverage.

• Notice requirements - Employers must send timely notices, including the Initial (General) COBRA Notice and the Election Notice.

• Coverage length - Usually 18 months. It can extend to 29 months for a disability or 36 months for certain dependent events.

• Cost: - Up to 102% of the full premium (the premium plus a 2% administrative fee).

 

Cal-COBRA

​

Cal-COBRA covers smaller California employers that federal COBRA doesn't reach.

• Who must comply - California employers with 2–19 employees whose group health plan is fully insured (not self-funded).

• Who administers it - The insurance carrier handles notices, elections, and premium collection. The employer is still responsible for reporting qualifying events to the carrier.

• Employer responsibility - Notify the carrier in writing within 30 days of a termination or reduction in hours.

• Coverage length - Up to 36 months.

• Cost - Up to 110% of the full premium.

• Extension for COBRA enrollees - Employees who use up 18 months of federal COBRA may qualify to extend through Cal-COBRA, up to 36 months in total.

 

Why this matters

​

• Missed or late notices can bring daily penalties per beneficiary, IRS excise taxes, and lawsuits.

• Under Cal-COBRA, if you don't tell the carrier about a qualifying event, a former employee can lose coverage they had every right to keep.

• Continuation coverage ties into offboarding, payroll deductions, and benefits systems, so it can't be left until the end.

 

At Sprout & Vine, continuation coverage is built into your benefits and offboarding processes, whether you're under federal COBRA or Cal-COBRA. Departing employees get their coverage options on time, and your business stays compliant.