Federal COBRA v State Continuation Rights

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The COVID-19 pandemic has caused millions of American workers to lose their employer-provided group health benefits resulting in an unprecedented volume of individuals and families seeking coverage either through Federal COBRA or State Continuation (sometimes referred to as “Mini COBRA”). With different rules and regulations pertaining to each state continuation and Federal COBRA, it is critical that you are aware of the differences and the impact it may have on the consumer. In this “Timely Intelligence” article OCA addresses the core differences between Federal COBRA and State Continuation rules in NY, NJ, PA, and DE.

Federal COBRA


What is it?

COBRA is group health plan continuation coverage that occurs when a Qualified Beneficiary (QB) loses group health plan coverage due to a Qualifying Event (QE).


  • QB – covered person the day before the event with same rights as similarly situated employees.
  • Similarly situated are employees of the same class if different rules apply by class.
  • The child of a dependent child is generally not eligible for coverage. Best to check the insurance contract for eligibility.
  • An employee entitled to Medicare at the time of the QE must be offered COBRA continuation.
  • When the employee becomes entitled to Medicare while covered under COBRA, the COBRA ends
  • QE – termination, reduction of hours to less than coverage eligibility.
  • Continuation is for a limited time on a self-paid basis.

Who must comply?

Generally, employers, including self-insured employers, as well as non-profit organizations with 20 or more on payroll (including full time, part time, union and non-union) for more than 50% of Business days in the preceding calendar year must offer COBRA continuation of the group health plan.

  • Churches are not subject to Federal COBRA.
  • Applies to medical, dental, vision, and HRAs.

NOTE: HRAs are never included under state continuation as HRAs are self-funded plans. COBRA must only be offered under an FSA with a positive account balance at the time of the Qualifying Event (QE). Does not apply to the Qualified Small Employer HRAs a/k/a QSEHRAs effective 1-1-2017.

TIP:  IRS 414 (b), (c), (m) or (o), the affiliated company rule applies meaning all affiliated company employees are added to determine if the employer is subject to Federal COBRA

What employers are subject to Federal COBRA

For the purpose of Federal COBRA determination, the employer determines the number of hours that equal full time. S/he can elect up to 40 hours. Those working less than full time count as fractions.

Example: A company has 10 FT employees working 40 hours every week. They also have 30 PT employees working between 1 and 39 hours per week for a total of 480 hours every week. 40 FT hours divided into 480 PT hours equals 12 FT equivalents. The 10 FT plus 12  full time equivalents equal 22 on the payroll. If there have been 20 or more for more than 50% of the typical business days of the preceding year, the group must comply with COBRA.

Qualifying Events (QE)

QEs are events that cause an individual to lose group health coverage. The type of event determines the period of time a plan must offer continuation of coverage.

QE for employees to continue for 18 months:

  • Termination of covered employee’s employment for any reason other than “gross misconduct“
  • Reduction of hours that results in the loss of eligibility for health coverage.
  • Elimination of a class of employees is NOT a Federal COBRA event (but does apply to NY COBRA).
  • FMLA – QE may occur when 12 weeks of leave is exhausted or the employee informs employer of the intent not to return to work.

Spouse or dependent events for 36 months:

  • Death of the employee
  • Divorce
  • Child aging out
  • Covered employee becomes entitled=enrolled in Medicare less than 18 months prior to a QE.

Medicare disability extended coverage

An employee is eligible for an additional 11 months of coverage for a total of 29 months if the ex employee COBRA continuee has been deemed disabled by Medicare. The employer must advise the insurance carrier within 60 days of this determination.

Gross Misconduct

Without explicit defining language, the burden falls entirely on the employer to determine denying coverage due to gross misconduct. Acts of gross misconduct are intentional, wanton, willful, deliberate, reckless, or in deliberate indifference to an employer’s interest. Generally, action that would preclude eligibility for unemployment compensation would suggest gross misconduct. Always seek legal advice before denying continuation coverage.

TIP: the broker should never make a determination or a recommendation to deny coverage.

Secondary events while on COBRA

Secondary events allow the covered individual to extend COBRA from the original 18 months to 36 months

  • Divorce or legal separation.
  • Death of the covered employee.
  • The loss of dependent child status under the plan rules. This includes a covered Dependent to 26 who ages out under plan rules.

Changing plans at the time of election of continuation

QBs may not change plans until open enrollment. The exception to this is if the continuee is moving out of a service area and the employer has a plan available to offer that would allow access to providers as in the case of HMO v PPO


  • The Initial / General Notice must be provided within 90 days of enrollment onto the group health plan
  • Election Notice must be provided within 14 days of the QE but if the employer is acting as the administrator, s/he has an additional 30 days to send the notice for a total of 44 days.
  • First class mail or a certificate of mailing is recommended. Registered mail is NOT .
  • Early termination notice e.g. if the employer plan is terminating or for non-payment of premium.
  • Notice of unavailability of COBRA
  • Notice of premiums short by insignificant amount (allowing 30 days for the QB to pay)
  • There is a $110 per day per affected person penalty for notices not being sent

TIP: always use the official DOL COBRA notices. Do NOT create your own.

Electing COBRA

QBs have 60 days from the loss of coverage or from the date the election notice was provided (postmarked) to elect.


  • The first premium is due 45 days after election
  • Continuees pay the full premium being charged by the carrier; 100% of the employee plus employer contributions.
  • Employers may charge an additional 2% administrative fee.
  • For those extending coverage from 18-29 months due to Medicare deemed disability, the employer may charge up to 150% of the total premium (including the premium for any covered spouse and dependent coverage)

TIP: Payment is timely if made within 30 days after the due date / grace period . Be careful not to rush to terminate coverage beforehand.

COBRA and other group coverage

COBRA may terminate when the QB becomes effectively enrolled onto other group coverage. However, if the other coverage was obtained prior to the COBRA election, both may remain in place

Domestic Partners / Civil Union Partners

  • Under Federal COBRA, a QB is an employee, spouse or dependent child as defined in the insurance contract.
  • Spouses of opposite sex and same sex marriage are QBs
  • Domestic Partners and Civil Union Partners are not spouses for this purpose.
  • They are eligible for state continuation when the state allows them access to coverage.
  • State laws regarding overage dependents e.g. DU31 in NJ and DU30 in NY does not make them dependents under the contract meaning they are not eligible for COBRA.

Reservists Rights

Effective December 10, 2004, reservists and their families may continue up to 24 months.

New York COBRA

NY COBRA is a state continuation plan and only covers fully insured plans with less than 20 employees. Effective July 1, 2009, NY COBRA is added to Federal COBRA so that ALL QEs qualify for 36 months of continuation if the plan is fully insured.

QE for:

  • Termination of employment for other than cause
  • Reduction of hours that results in a loss of coverage

Note: elimination of a class is a QE only under NY COBRA

QE for spouse and dependents

  • Death of the employee, Divorce or legal separation, Dependent child aging out

NY v Federal COBRA differences

  • Churches are eligible
  • The law requires that a notice be provided within five (5) working days of loss of coverage.
  • Premium is due in advance of election
  • Dental is not required to be offered
  • Since HRAs are self-funded, they are not subject to NY COBRA.

NJ State Continuation

Applies to employers with a NJ Small Group contract and who has between 1-50 employees in the preceding calendar year.

QE permitting 18 months of continued coverage

  • Termination of the employee for other than cause and  reduction of hours below eligibility

Permits 36 months of continued coverage

  • Death of the employee, Divorce, Dependent children aging out

Medicare disability extended coverage

  • An employee is eligible for an additional 11 months of coverage for a total of 29 months if the ex employee COBRA continuee has been deemed disabled by Medicare. The employer must advise the insurance carrier within 60 days of this determination.

NJ v Federal COBRA differences

NJ State Continuation includes the entire 1- 50 market so that employers in that range not subject to Federal COBRA must offer NJ State Continuation.

  • Churches are eligible
  • Notice must be given to employee within 14 days of the QE. No requirement that spouse of dependents must be notified.
  • Election and first premium due 30 days from the QE
  • The DU31 may not continue unless the parent is also continuing
  • Domestic Partner / Civil Union Partners may continue
  • While under NJ State Continuation, only NEWLY acquired dependents may enroll
  • Dental is not required to be offered
  • Since HRAs are self-funded, they are not subject to NJ State Continuation.


Became effective July 2009 and applies to fully insured group plans with 2-19 employees in the preceding calendar year. Individuals must have been covered by the employer plan or under similar benefits under any group plan for 3 or more consecutive months prior to the QE

  • Allows up to nine (9) months of continuation
  • Does not apply to dental or vision
  • Since HRAs are self-funded, they are not subject to PA Mini COBRA

Qualifying Events

  • Termination of the employee for other than cause,  Reduction of hours below eligibility,
  • Death of the employee, Divorce, Dependent children aging out


  • Employer must notify the covered employee and insurer within 30 days of the QE
  • If coverage is elected, employee or eligible dependent must notify the employer within 30 days of receiving the notice from the employer
  • Employer then has 14 days to advise the carrier


Became effective June 21, 2012. Coverage is for a maximum of nine (9) months

  • Since HRAs are self-funded, they are not subject to DE Mini COBRA.


  • Individuals must have been covered by the employer plan or under similar benefits under any group plan for 3 or more consecutive months prior to the QE
  • Not covered or eligible for Medicare
  • Must be ineligible for other employer based coverage

Qualifying Events

  • Termination for other than gross misconduct, Reduction of hours that falls below eligibility for coverage,
  • Death of the employee, Divorce or legal separation, Dependent child ages out



This information is provided as general information only and is not intended to constitute legal advice. Opinions expressed are solely the opinion of the author.

About the author: Joan Fusco retired from Savoy Associates after 17 years of service and in various capacities on April 1, 2020. She was Chief Compliance Officer, NAHU liaison officer, creator, director and instructor for their five CE schools , and insurance law researcher, trainer and compliance lifeline for staff and brokers.

Joan served in many capacities for the corporate and state NAHU organizations over here 24 year membership as a member of the legislative council, an education provider, author of designation materials and chair of the compliance corner group that provides insurance related answers and webinars for NAHU members nationwide. Prior to Savoy, she chaired the NJ Life and Health Commissioner’s Advisory Board, created, managed and instructed the Horizon BCBSNJ continuation school and department, served as representative on the NJ Small Group Board,  was the manager of compliance and quality at Horizon BCBSNJ providing education and assistance to staff and brokers.

Joan served a total of 48 years for the insurance industry.




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