A Brief Introduction to CAL-COBRA

The vast majority of employees will receive medical coverage through their employer. Employers are often required to provide group health coverage, but this coverage only applies to current employees.

Federal and state law has developed a means to help employees retain health coverage after they have discontinued employment. COBRA stands for “Consolidated Omnibus Budget Reconciliation Act.” It provides continuation health coverage for former employees, retired employees, and former employees’ spouses and dependent children, even after they have separated employment with a company. Essentially, this type of health coverage treats the employee as if he or she is still working with the company for a certain duration.

There is both a federal and California version of COBRA.


CAL-COBRA allows employees and their families to continue coverage after ending employment. In California, employers that have between 2 and 19 employees should have CAL-COBRA coverage. Employers that have 20 or more employees fall under federal COBRA requirements.

When an employee ends employment, the employer should notify their insurance carrier, and the insurance carrier will generally work directly with the former employee to establish coverage if desired. Employees must elect coverage within 60 days of their termination. They can continue coverage for up to 36 months. California offers coverage longer than federal COBRA, but the premiums are generally more expensive for the employee.

Requirements for Small Businesses in California under CAL-COBRA

Employees pay the required premiums when they are eligible for CAL-COBRA. An employer’s obligation under CAL-COBRA is actually fairly limited. Employers have the following duties under California law:

  1. Notify the applicable health plan or insurance carrier within 30 days of the employee’s termination or reduction in hours that the employee is eligible for CAL-COBRA.
  2. Refer the former employee to the health plan provider so that they can start CAL-COBRA coverage, or help the former employee with the enrollment process.
  3. Notify former employees who may be on CAL-COBRA coverage when you change or alter group plans. Former employees can continue coverage under the new group plan, if desired. You should also provide the new group plan provider information on individuals who may be taking advantage of CAL-COBRA.

CAL-COBRA Limitations and Restrictions

Employees who are discharged for gross misconduct are not eligible for CAL-COBRA. In some cases, the former employee may not qualify for CAL-COBRA if he or she is covered by another group health plan. In addition, former employees who are eligible for Medicare will not qualify for CAL-COBRA. As an employer, however, you will not have to make these eligibility determinations.

Of course, employees can waive their rights to CAL-COBRA if they do not elect coverage in time, fail to pay premiums, or have already used their eligibility period.

Although CAL-COBRA offers some real benefits for employees, it can be administratively difficult for smaller California businesses to handle. If you need more information about how your business should deal with CAL-COBRA, we can help. Contact us for more information.

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