COBRA Basics Every Employer Should Know (and the Common Mistakes We See People Make)

Let’s be honest — COBRA is one of those things that sounds way more complicated than it needs to be, and most of the employers I work with dread dealing with it. I get it. The rules feel fussy, the deadlines are unforgiving, and the paperwork has a way of falling through the cracks right when someone is walking out the door. But here’s the thing: once you understand the handful of pieces that really matter, it stops being scary. So let me walk you through the basics the way I’d explain them over coffee, and then I’ll flag the mistakes I see trip people up the most.

First, What COBRA Actually Is

COBRA (the Consolidated Omnibus Budget Reconciliation Act, if you want to impress someone at a party) gives employees and their families the right to keep their group health coverage for a limited time after they’d otherwise lose it — things like leaving a job, having hours cut, or certain life events like divorce. The catch is that the person now pays the full premium themselves, plus a small (2%) administrative fee, instead of having the employer chip in. Generally, it applies to employers with 20 or more employees, though a number of states have their own “mini-COBRA” rules that impact smaller companies too, so it’s always worth checking the requirements that apply to your company.

The Deadlines Are the Whole Ballgame

If you remember nothing else, remember this: COBRA lives and dies by its timelines. When a qualifying event happens, an employee generally has 30 days to notify the plan administrator, and from there the election notice needs to go out to the employee within 14 days. The person then has 60 days to decide whether they want the coverage, and 45 days after that to make their first payment. Miss one of these windows and you can create real liability for the company — not to mention a genuinely stressful situation for someone who thought they had coverage and didn’t.

The Mistakes I See Most Often

Assuming the carrier or payroll company “has it handled.” This is the big one. Plenty of employers assume someone else is sending the notices, and then nobody is. Confirm exactly who owns COBRA administration and get it in writing.

Forgetting the initial general notice. There are actually two notices people mix up — the general notice that goes out when someone first enrolls and explains their COBRA rights, and the election notice at the qualifying event. The first one gets skipped constantly because everyone’s focused on the exit, not the entry. Our advice: build the initial notice right into your new-hire onboarding package so it never slips through the cracks.

Not setting up a way to track payments. Here’s one that catches people off guard. Once someone elects COBRA, they’re paying their own premiums — and you need a reliable way to know who has paid, who is late, and who has fallen off. If you’re tracking that in your head or on a sticky note, it will bite you. Set up an actual process before you need it: coordinate a recurring invoicing routine with your finance team, decide who’s tracking payments each month, and agree on how you’ll handle a missed payment. COBRA has real grace-period rules, and a missed payment can end coverage — so you want the paper trail and the routine in place from day one, not scrambling to reconstruct it later.

Being sloppy about documentation. If you can’t show when and how a notice went out, it’s very hard to prove you did it. Keep dated records of every notice — I promise your future self will thank you.

Treating every termination the same. Someone let go for gross misconduct may not be entitled to COBRA at all, while a reduction in hours often does trigger it. Don’t run everyone through the same template without thinking it through.

Going silent on the person. Even when you’ve done everything by the book, a quick, human heads-up that the paperwork is coming goes a long way. People are usually navigating a job loss or a hard life change, and a little clarity keeps it from turning into a panicked phone call later.

The Bottom Line

COBRA really comes down to three habits: know your deadlines, send the right notices to the right people, and document everything you do. Nail those, and you’ve handled the vast majority of what can go wrong. And if you ever find yourself staring at a separation and not sure which clock is ticking, that’s exactly the kind of thing we help clients sort out every day — so don’t hesitate to contact us at insource@insourceservices.com before the deadline, not after.