What is COBRA?

Picture this scenario: You’ve just hired your first US employee through your international expansion. Everything’s going smoothly until that employee resigns unexpectedly after eight months. Two weeks later, they contact your HR administrator asking about “COBRA rights” and demanding information about continuing their health insurance. You have no idea what they’re talking about, and now you’re wondering if you’ve violated some obscure American employment law.

Welcome to the world of COBRA—one of the most important yet frequently misunderstood aspects of US employee benefits that international companies must navigate.

For international business owners and executives expanding to the United States, understanding COBRA isn’t optional. It’s a federal legal requirement that applies to most employers offering

group health insurance, and getting it wrong can result in significant penalties, lawsuits, and damage to your reputation as a responsible employer.

What Exactly Is COBRA?

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1985, a federal law that amended the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code, and the Public Health Service Act. Despite its bureaucratic name, COBRA serves a straightforward purpose: it requires most employers to offer employees and their families the opportunity to continue their group health insurance coverage temporarily after certain events that would otherwise cause them to lose that coverage.

Think of COBRA as a bridge. It provides temporary continuation of the same health insurance benefits employees had while working, allowing them time to find alternative coverage through a new employer, the Health Insurance Marketplace, or other sources.

“COBRA represents one of the most significant employee protections in American employment law,” explains Joanne Farquharson, President & CEO of Foothold America. “International companies often underestimate its importance because similar protections don’t exist in their home countries. But in the US, health insurance is deeply connected to employment, and COBRA ensures that losing a job doesn’t immediately mean losing access to healthcare.”

The law applies to private-sector employers with 20 or more employees, as well as state and local governments. It covers group health plans, including medical, dental, and vision coverage, but does not cover life insurance or disability benefits.

Why COBRA Matters for International Employers

Understanding COBRA’s importance requires understanding the unique relationship between employment and health insurance in the United States. Unlike many countries with national health systems, Americans overwhelmingly obtain health insurance through their employers. According to the US Census Bureau, approximately 54% of Americans receive health insurance through employer-sponsored plans.

This creates a critical vulnerability: when employment ends, health coverage often ends simultaneously. For employees and their families, losing health insurance can be catastrophic, potentially leaving them without access to necessary medical care, prescription medications, or ongoing treatment for chronic conditions.

COBRA addresses this vulnerability by mandating that employers allow former employees to continue their group health coverage, albeit at their own expense. This continuation coverage isn’t charity—former employees pay the full premium plus up to 2% for administrative costs—but it provides crucial continuity of care during transitions.

For international companies, COBRA compliance presents several challenges. The notification requirements are strict and time-sensitive. The penalties for non-compliance can be severe. And unlike many aspects of US employment law, COBRA obligations continue even after the employment relationship ends, creating ongoing administrative responsibilities for terminated employees.

Who Must Comply with COBRA?

COBRA requirements apply to private-sector employers with 20 or more employees on more than 50% of typical business days in the previous calendar year. This employee count includes full-time and part-time workers, though part-time employees count as fractions based on hours worked.

Here’s the critical point for international companies: the 20-employee threshold is remarkably easy to reach. If your US operation employs 15 full-time workers and 10 part-time workers working 20 hours per week, you likely meet the threshold and must comply with COBRA.

The law applies to group health plans offered by these employers, including medical insurance, dental coverage, vision care, and health flexible spending accounts (FSAs). It does not apply to life insurance, disability insurance, or other non-health benefits.

State and local government employers of any size must also comply with COBRA requirements under the Public Health Service Act. The Centers for Medicare & Medicaid Services (CMS) administers these “public sector” COBRA requirements.

Mini-COBRA: State Continuation Laws

Many states have enacted their own continuation coverage laws, often called “mini-COBRA” laws, that extend similar protections to employees of smaller employers not covered by federal COBRA. These state laws vary significantly in their requirements, covered employers, and continuation periods.

For example, California requires employers with 2 to 19 employees to offer continuation coverage. New York mandates coverage for employers with fewer than 20 employees, providing up to 36 months of continuation. Texas offers continuation coverage for employers with 2 to 19 employees for up to 9 months.

“State continuation laws create additional complexity for international companies operating in multiple US states,” notes Laurie Spicer, Director of US Expansion at Foothold America. “You might not be subject to federal COBRA because you have 15 employees, but you could still have state law obligations. Understanding which rules apply in each state where you operate is essential.”

Qualifying Events: When COBRA Rights Are Triggered

COBRA coverage isn’t automatically available to all former employees. It’s triggered by specific “qualifying events”—circumstances that would cause an individual to lose group health coverage. The type of qualifying event determines who becomes eligible for COBRA and how long the coverage lasts.

Qualifying Events for Employees

For employees themselves, qualifying events that trigger COBRA rights include:

Voluntary or involuntary termination of employment for any reason other than gross misconduct. This includes resignations, layoffs, terminations for performance, and retirement. The key exception is “gross misconduct”—a high bar that typically requires egregious behavior like theft, violence, or criminal activity. Simply being fired for poor performance does not constitute gross misconduct.

Reduction in hours that causes loss of coverage. If you reduce an employee’s hours below the threshold for health insurance eligibility (commonly 30 hours per week under the Affordable Care Act), that employee becomes eligible for COBRA even though the employment relationship continues.

These qualifying events entitle employees to up to 18 months of COBRA continuation coverage.

Qualifying Events for Spouses and Dependents

Spouses and dependent children can also experience qualifying events that trigger their own COBRA rights, sometimes even while the employee continues working. These include:

Divorce or legal separation from the covered employee. When a marriage ends, the former spouse typically loses eligibility for the employee’s health insurance. COBRA allows that individual to continue coverage for up to 36 months.

Death of the covered employee. The employee’s spouse and dependents can elect COBRA coverage for up to 36 months following the employee’s death.

The covered employee becoming entitled to Medicare. When an employee becomes eligible for Medicare (typically at age 65), dependent family members may lose coverage under the employee’s group plan. Those dependents can elect up to 36 months of COBRA coverage.

A dependent child losing dependent status under the plan. When a child ages out of coverage (commonly at age 26 under the Affordable Care Act, though plan terms vary), that individual can elect up to 36 months of COBRA coverage.

“Understanding qualifying events requires careful attention to your specific health plan’s terms,” explains Geanice Barganier, Vice President of People Operations at Foothold America. “Plans have different eligibility rules, different definitions of dependents, and different events that terminate coverage. COBRA rights are triggered when someone loses coverage due to a qualifying event, so you must understand precisely when your plan’s coverage ends.”

Special Rules for Disability Extensions

A special extension applies when a qualifying event involves termination of employment or reduction of hours, and the employee or a family member is determined to be disabled by the Social Security Administration (SSA) under Title II or Title XVI of the Social Security Act.

The disability must exist at some point during the first 60 days of COBRA coverage. The disability determination can be issued at any time during the initial 18-month COBRA period. If properly certified, this extends the COBRA coverage period from 18 months to 29 months for all qualified beneficiaries in the family.

The disabled individual must notify the plan administrator of the disability determination within 60 days after it’s issued, but no later than the end of the 18-month coverage period. Plans can charge up to 150% of the applicable premium (rather than the standard 102%) for the additional 11 months of disability extension coverage.

Who Is Entitled to COBRA Coverage?

COBRA coverage extends to “qualified beneficiaries”—individuals who were covered by the group health plan on the day before the qualifying event occurred. This includes:

• The covered employee who experiences termination or reduction in hours
• The employee’s spouse who was covered under the plan
• Dependent children who were covered under the plan
• Any child born to or placed for adoption with the covered employee during the COBRA coverage period (these children are automatically considered qualified beneficiaries)

Each qualified beneficiary has an independent right to elect COBRA coverage. This means that if you, your spouse, and two dependent children all lose coverage due to your termination, each of the four family members can independently decide whether to elect COBRA.

The covered employee or spouse can elect coverage on behalf of dependent children or on behalf of all qualified beneficiaries. However, each person’s independent election right means that one family member could elect coverage while others do not.

Employer Notification Obligations: A Strict Timeline

COBRA creates specific, time-sensitive notification obligations for employers and plan administrators. Understanding and meeting these deadlines is crucial because missing them can result in significant penalties and legal liability.

Initial General Notice

Employers must provide a general notice of COBRA rights to each employee and spouse when coverage under the group health plan begins. This initial notice must explain:

• What COBRA continuation coverage is
• When it may become available to the employee and family
• The employee’s and family members’ rights and obligations under COBRA
• How to notify the plan administrator of a qualifying event when required

The Department of Labor provides model COBRA general notices that employers can use. While using these model notices isn’t required, they provide a safe harbor—meaning that using them properly demonstrates compliance with notice requirements.

Notice of Qualifying Event

When a qualifying event occurs, specific parties have responsibility for notifying the plan administrator within defined timeframes.

Employer’s Responsibility: The employer must notify the plan administrator within 30 days after the following qualifying events:

• Termination of the covered employee’s employment
• Reduction in the covered employee’s hours
• Death of the covered employee
• The covered employee becoming entitled to Medicare
• The employer’s commencement of bankruptcy proceedings (for retirees)

Employee’s or Beneficiary’s Responsibility: The employee or qualified beneficiary must notify the plan administrator within 60 days after the following qualifying events:

• Divorce or legal separation
• A dependent child losing dependent status under the plan

The employee or beneficiary must provide this notice according to the plan’s reasonable notification procedures. If the plan doesn’t have reasonable procedures, notice can be given to the person or unit that handles employee benefits matters.

Election Notice

Once the plan administrator receives notice of a qualifying event, they must provide an election notice to all qualified beneficiaries within 14 days. If the employer serves as both the employer and plan administrator and handles COBRA notices directly, they have up to 44 days total (30 days to notify themselves plus 14 days to send election notice) to provide the election notice.

The election notice must explain:

• The qualified beneficiaries’ rights to elect COBRA continuation coverage
• The consequences of electing or failing to elect coverage
• The length of time COBRA coverage will be available
• How to elect coverage
• When premiums are due and where to send them
• The plan’s procedures for terminating COBRA coverage

Missing these notification deadlines can have serious consequences. If an employer fails to provide required notices, qualified beneficiaries may be entitled to additional time to elect coverage or additional time to provide required notifications, effectively extending the employer’s obligations and exposure to liability.

The Election Period and Coverage Start

Qualified beneficiaries must be given at least 60 days to decide whether to elect COBRA coverage. This election period begins on the later of:

• The date coverage would otherwise be lost due to the qualifying event, or
• The date the election notice is provided

During this 60-day window, qualified beneficiaries can:

• Elect COBRA coverage
• Initially waive coverage but change their minds and elect it later (as long as it’s still within the 60-day election period)
• Do nothing (which results in no COBRA coverage)

If COBRA coverage is elected within the 60-day period and the first premium is paid within 45 days of election, coverage is retroactive to the date it would otherwise have been lost. This retroactive coverage is crucial because it means there are no gaps in coverage—claims incurred from the date of the qualifying event forward will be covered if COBRA is properly elected and paid for.

“The retroactive coverage feature is one of COBRA’s most important protections,” notes Joanne Farquharson. “An employee who loses coverage due to termination on January 15 has until March 15 or later to elect COBRA. If they elect on March 10 and pay the first premium, their coverage is retroactive to January 15. Any medical expenses incurred during that gap period are covered.”

Joanne Farquharson, President & CEO

COBRA Premium Costs: What Employees Pay

COBRA continuation coverage is not free. Qualified beneficiaries must pay the full cost of coverage, which can come as a shock to employees accustomed to employer-subsidized premiums.

The maximum COBRA premium that plans can charge is 102% of the cost of coverage. This includes:

• The portion the employer was paying
• The portion the employee was paying
• An additional 2% to cover administrative costs

For example, if a group health plan costs $800 per month total ($200 paid by the employee through payroll deductions and $600 paid by the employer), the COBRA premium can be up to $816 per month (102% of $800).

For individuals receiving the 11-month disability extension (months 19 through 29), plans can charge up to 150% of the cost of coverage.

These costs often make COBRA coverage prohibitively expensive for former employees, particularly those who lost their jobs and now lack steady income. However, for individuals with ongoing medical needs, chronic conditions, or pregnancies, COBRA’s continuation of existing coverage may be preferable to finding new individual market insurance with different networks, deductibles, and coverage terms.

Payment Deadlines and Grace Periods

COBRA has specific payment requirements that both employers and qualified beneficiaries must understand:

First Premium Payment: Plans cannot require payment for any period of COBRA coverage earlier than 45 days after the date the qualified beneficiary made their election. This gives individuals time to arrange payment after deciding to elect coverage.

Ongoing Premium Payments: After the initial premium, all subsequent payments must be made by the due date established by the plan. Federal regulations provide a 30-day grace period for ongoing premium payments. If payment is made within this grace period, coverage continues without interruption. If payment isn’t received within the grace period, the plan can terminate COBRA coverage.

“Premium payment rules create ongoing administrative obligations,” explains Geanice Barganier. “You must track payments, send invoices, monitor grace periods, and properly terminate coverage for non-payment. Many companies outsource COBRA administration to third-party administrators specifically because the ongoing obligations are complex and time-consuming.”

How Long Does COBRA Coverage Last?

The duration of COBRA coverage depends on the type of qualifying event:

18 Months: Qualifying events related to termination of employment or reduction in hours entitle the employee and covered family members to up to 18 months of continuation coverage.

29 Months: If a qualified beneficiary is determined by Social Security to be disabled at any time during the first 60 days of COBRA coverage, the 18-month period extends to 29 months for all qualified beneficiaries in the family (with the plan allowed to charge 150% for months 19-29).

36 Months: Qualifying events related to divorce, legal separation, death of the covered employee, dependent child losing dependent status, or the covered employee becoming entitled to Medicare entitle affected individuals to up to 36 months of continuation coverage.

Multiple Qualifying Events: If a second qualifying event occurs during a period of COBRA coverage, the maximum coverage period can extend to 36 months from the original qualifying event. For example, if an employee is terminated (triggering 18 months of COBRA) and then dies 10 months later, the surviving spouse and dependents can receive coverage for up to 36 months from the original termination date.

Early Termination of COBRA Coverage

COBRA coverage can end before the maximum period in several circumstances:

• The qualified beneficiary fails to pay premiums on time
• The qualified beneficiary becomes covered under another group health plan (with some exceptions for pre-existing condition exclusions)
• The qualified beneficiary becomes entitled to Medicare benefits
• The employer stops maintaining any group health plan
• The qualified beneficiary commits fraud in connection with the plan

Employers must properly document the reason for any early termination and provide appropriate notice to the qualified beneficiary.

State Continuation Coverage: Filling the Gaps

As mentioned earlier, many states have enacted their own continuation coverage laws for smaller employers not covered by federal COBRA. These state laws vary significantly, creating a patchwork of requirements across the country.

Some key state continuation programs include:

California (Cal-COBRA): Applies to employers with 2 to 19 employees. Provides 36 months of continuation coverage after federal COBRA rights are exhausted. Also offers conversion policies at the end of continuation coverage.

New York: Requires employers with fewer than 20 employees to provide up to 36 months of continuation coverage. The provisions closely mirror federal COBRA but apply to smaller employers.

Texas: Applies to employers with 2 to 19 employees, providing up to 9 months of continuation coverage. Also mandates conversion policies.

Massachusetts: Requires employers with 2 to 19 employees to provide continuation coverage, with the duration depending on the qualifying event.

Florida: Provides 18 months of continuation for employers with 2 to 19 employees after termination of employment.

For international companies operating in multiple US states, understanding which continuation laws apply in each location is essential. An employer might need to comply with federal COBRA in some states while following different state continuation requirements in others, depending on the number of employees in each location.

COBRA Administration: Managing Ongoing Obligations

Administering COBRA creates ongoing responsibilities that extend well beyond the termination of employment. These obligations include:

Tracking Qualified Beneficiaries

Plans must maintain accurate records of all qualified beneficiaries, their coverage periods, premium payment status, and eligibility end dates. This requires tracking systems that can handle multiple beneficiaries with different qualifying events, different maximum coverage periods, and different payment statuses.

Sending Monthly Invoices

Qualified beneficiaries must receive regular invoices showing the premium amount due, the due date, where to send payment, and the consequences of non-payment. Many plans send monthly invoices, though some send quarterly invoices for administrative efficiency.

Monitoring Premium Payments

Plans must track whether payments are received on time, whether they’re for the correct amount, and whether the 30-day grace period has expired. This requires establishing payment processing systems and procedures for handling late, partial, or missing payments.

Managing Coverage Changes

If the employer’s group health plan changes—whether switching insurance carriers, modifying benefits, or adjusting coverage levels—qualified beneficiaries receiving COBRA must receive the same changes. During open enrollment periods, COBRA beneficiaries have the same rights as active employees to change coverage options if the plan offers multiple options.

Terminating Coverage Appropriately

When COBRA coverage ends, whether due to expiration of the maximum period, non-payment, or another qualifying termination reason, plans must provide appropriate notices and properly terminate coverage with the insurance carrier.

Many employers choose to outsource COBRA administration to third-party administrators (TPAs) who specialize in managing these complex requirements. TPAs charge fees for their services but handle all notifications, premium billing, payment tracking, and compliance obligations.

“For international companies, COBRA administration often represents an unfamiliar compliance burden,” explains Laurie Spicer. “You’re dealing with ongoing obligations to former employees in a complex regulatory framework. Using a specialized administrator ensures compliance while freeing your team to focus on current employees and business operations.”

Laurie Spicer, Director of US Expansion

Penalties for COBRA Non-Compliance

COBRA violations can result in substantial penalties from multiple sources:

Excise Taxes

The Internal Revenue Code imposes an excise tax of $100 per day per affected individual for COBRA violations. This tax applies to each day of non-compliance for each individual affected by the violation. For serious violations affecting multiple employees over extended periods, these taxes can accumulate to hundreds of thousands of dollars.

ERISA Penalties

The Department of Labor can impose civil penalties under ERISA of up to $110 per day for failing to provide required COBRA notices. These penalties apply separately from excise taxes, multiplying the potential exposure.

Private Lawsuits

Qualified beneficiaries can sue employers for COBRA violations under ERISA’s civil enforcement provisions. Successful plaintiffs can recover the value of benefits that should have been provided, attorney’s fees, and in some cases, punitive damages. Courts have awarded significant damages in COBRA cases, particularly where notification failures resulted in qualified beneficiaries going without necessary medical care.

State Law Violations

Violations of state continuation coverage laws can result in additional state-specific penalties, cease and desist orders, and potential license suspensions for insurance carriers.

“The penalty structure for COBRA violations is unusually severe compared to many employment laws,” notes Joanne Farquharson. “The per-day, per-person calculation means that small violations can quickly become very expensive. A company that fails to provide election notices to three qualified beneficiaries for six months could face excise taxes exceeding $54,000, plus DOL penalties, plus potential lawsuit exposure. This is why getting COBRA right from the beginning is so important.”

Joanne Farquharson, President & CEO

COBRA and International Company Operations

For international companies with US operations, COBRA presents unique challenges that differ from their home country’s employment practices.

Structural Differences from National Health Systems

Most developed countries outside the United States provide healthcare through national health systems or mandate employer-provided private insurance with government oversight. When employment ends, healthcare access continues through the national system.

The US operates differently. Health insurance is predominantly employer-sponsored and voluntary. When employment ends, coverage typically ends. COBRA provides the bridge to prevent immediate loss of coverage, but it’s temporary and expensive.

This fundamental structural difference means international companies must adapt their understanding of employee benefits and post-employment obligations when operating in the US market.

Integration with Employer of Record Services

Many international companies initially enter the US market through Employer of Record (EOR) services rather than establishing their own entities. EOR providers become the legal employer, handling payroll, benefits administration, and compliance obligations including COBRA.

“When you engage an EOR like Foothold America, we handle all COBRA administration as part of our service,” explains Joanne Farquharson. “We provide the required notices, track qualifying events, manage the election process, and coordinate with the insurance carrier. This removes the compliance burden from international companies who may be unfamiliar with COBRA requirements.”

However, as companies grow and transition from EOR to establishing their own US entities, they must assume COBRA obligations themselves. This transition requires establishing COBRA administration processes, training HR staff, and potentially engaging a third-party administrator.

Multi-State Compliance Complexity

International companies operating in multiple US states face the challenge of complying with varying state continuation laws in addition to federal COBRA. A company might need to:

• Apply federal COBRA in states where it has 20 or more employees
• Apply California’s Cal-COBRA for locations with 2-19 employees
• Apply New York’s mini-COBRA for small locations in that state
• Apply different state rules in Texas, Massachusetts, or Florida

Tracking which law applies to each employee based on their work location and the company’s employee count in each state requires sophisticated HR systems and knowledgeable administrators.

“Multi-state compliance is one reason we recommend that international companies work with experienced US HR providers,” notes Laurie Spicer. “The state-by-state variations create substantial complexity. Having partners who understand these nuances across all 50 states ensures compliance regardless of where your employees work.”

Best Practices for COBRA Compliance

International companies can protect themselves from COBRA-related liability by implementing strong compliance practices:

Establish Clear Procedures

Develop written procedures for identifying qualifying events, providing required notices, tracking election periods, managing premium payments, and terminating coverage. Document these procedures and train all HR personnel who handle employee benefits.

Use Technology Wisely

Implement HR systems that can track COBRA-eligible individuals, send automated reminders for notification deadlines, and generate required notices. Many modern HRIS platforms include COBRA administration modules that automate compliance tasks.

Consider Third-Party Administration

Evaluate whether outsourcing COBRA administration to a specialized TPA makes sense for your organization. For companies unfamiliar with US compliance requirements, TPAs provide expertise, reduce liability, and free internal resources for core business activities.

Maintain Accurate Records

Keep detailed records of all COBRA-related activities, including dates notices were sent, election forms received, premium payments, and coverage terminations. These records become essential if disputes arise or government audits occur.

Train Your Team

Ensure that HR personnel, managers, and anyone involved in terminations understands COBRA requirements. Managers need to know that they must immediately notify HR when terminating employees so proper COBRA notices can be sent within required timeframes.

Review Annually

Review your COBRA procedures, notice forms, and administration processes annually to ensure they reflect current law. COBRA regulations occasionally change, and using outdated forms or procedures can result in technical violations.

Coordinate with Insurance Carriers

Maintain clear communication channels with your group health insurance carrier about COBRA administration. Ensure the carrier understands their role in continuing coverage for COBRA beneficiaries and receives timely information about elections and premium payments.

Common COBRA Mistakes and How to Avoid Them

After years of supporting international companies with US expansion, we’ve observed common COBRA mistakes that create unnecessary risk and liability.

Mistake 1: Delayed Notification

Waiting too long to send COBRA election notices is the most common violation. Employers must notify the plan administrator within 30 days of qualifying events like terminations, and the plan administrator must send election notices within 14 days.

How to Avoid: Implement automated systems that trigger COBRA notifications immediately when terminations are processed in your HR system. Make COBRA notification a mandatory step in your termination checklist.

Mistake 2: Incomplete Notice Content

Sending COBRA notices that don’t include all required information—such as premium amounts, payment deadlines, consequences of non-election, or how to elect coverage—creates technical violations that can void the notice entirely.

How to Avoid: Use the Department of Labor’s model COBRA notices or have legal counsel review your custom notices to ensure they include all required elements.

Mistake 3: Misunderstanding Qualifying Events

Not all employment separations trigger COBRA rights. Termination for gross misconduct is specifically excluded. Additionally, some companies mistakenly believe COBRA only applies to involuntary terminations when it actually applies to resignations, retirements, and voluntary departures as well.

How to Avoid: Train HR staff and managers on what constitutes qualifying events. When in doubt, treat the separation as a qualifying event—offering COBRA when not required creates no liability, while failing to offer it when required creates significant exposure.

Mistake 4: Failing to Track State Law Obligations

Companies below the 20-employee federal COBRA threshold sometimes believe they have no continuation coverage obligations, overlooking applicable state laws.

How to Avoid: Maintain a compliance matrix showing which federal and state laws apply in each location where you have employees. Review this matrix quarterly as your employee count changes.

Mistake 5: Poor Premium Payment Tracking

Failing to properly track premium payments, grace periods, and termination dates for non-payment creates situations where coverage continues without payment or terminates when it should continue.

How to Avoid: Use dedicated COBRA administration software or a TPA with robust payment tracking capabilities. Never rely on informal tracking methods for COBRA premium payments.

Mistake 6: Inadequate Documentation

Failing to document when notices were sent, when elections were made, when premiums were paid, and when coverage terminated makes it impossible to defend against claims of non-compliance.

How to Avoid: Maintain a dedicated COBRA file for each qualified beneficiary with copies of all notices sent, elections received, payment records, and correspondence. Use certified mail for critical notices to prove delivery.

The Intersection of COBRA with Other US Employment Laws

COBRA doesn’t exist in isolation. It intersects with several other US employment laws that international companies must understand.

The Affordable Care Act (ACA)

The Affordable Care Act created the Health Insurance Marketplace and established new insurance requirements. Key ACA provisions that affect COBRA include:

Dependent Coverage to Age 26: The ACA requires group health plans to allow young adults to remain on their parents’ coverage until age 26. This reduces situations where dependent children lose coverage and need COBRA.

Pre-Existing Condition Protections: The ACA prohibits pre-existing condition exclusions in group health plans. This makes alternative coverage options more viable for individuals who might otherwise need COBRA to maintain coverage for existing conditions.

Special Enrollment Rights: Losing employer-sponsored coverage creates a special enrollment period for Marketplace coverage, providing an alternative to COBRA for many individuals.

HIPAA Privacy Requirements

The Health Insurance Portability and Accountability Act (HIPAA) establishes strict privacy protections for individuals’ health information. COBRA administrators must comply with HIPAA when handling qualified beneficiaries’ protected health information.

This includes securing medical records, limiting access to health information, providing required privacy notices, and properly disposing of health documents. Violations of HIPAA privacy rules can result in penalties separate from COBRA violations.

Americans with Disabilities Act (ADA)

The ADA prohibits disability discrimination and requires reasonable accommodations. When an employee with a disability is terminated, COBRA election notices and materials must be provided in accessible formats if requested. This might include large print, electronic formats compatible with screen readers, or other accommodations.

Family and Medical Leave Act (FMLA)

The Family and Medical Leave Act provides eligible employees up to 12 weeks of unpaid leave for certain family and medical reasons. During FMLA leave, employers must maintain group health coverage on the same terms as if the employee continued working.

If an employee doesn’t return from FMLA leave, that termination of employment becomes a COBRA qualifying event. However, the COBRA coverage period doesn’t include the time the employee was on FMLA leave with continued health coverage.

Workers’ Compensation

When employees are injured on the job and receive workers’ compensation benefits, their employment status and health insurance eligibility can become complicated. If employment is terminated while receiving workers’ compensation, COBRA rights are triggered like any other termination.

Planning for COBRA During US Expansion

International companies should integrate COBRA compliance into their overall US expansion planning from the outset.

During Initial Market Entry

When first entering the US market, evaluate how you’ll handle employee benefits and COBRA obligations:

• If using an Employer of Record service, confirm that COBRA administration is included
• If establishing your own entity, determine whether you’ll handle COBRA internally or outsource to a TPA
• Budget for COBRA administration costs in your benefits expense projections
• Ensure your HR systems can track qualifying events and manage notifications

When Scaling Operations

As your US operations grow, your COBRA obligations become more complex:

• Monitor when you approach the 20-employee threshold that triggers federal COBRA
• Review state continuation laws as you expand into new states
• Evaluate whether your COBRA administration approach scales with your growth
• Consider implementing dedicated COBRA administration software

During Restructuring or Downsizing

Restructuring events that involve multiple terminations create significant COBRA administrative burdens:

• Plan for how you’ll manage potentially dozens or hundreds of qualified beneficiaries simultaneously
• Ensure you have sufficient HR resources to handle the notification and administration workload
• Consider engaging temporary COBRA administration support for large-scale events
• Communicate clearly with affected employees about their COBRA rights

“Business events like restructuring or downsizing can create COBRA administration challenges that overwhelm unprepared companies,” notes Laurie Spicer. “We’ve seen companies that laid off 50 employees suddenly facing the reality of administering COBRA for 150 qualified beneficiaries—the employees plus their spouses and children. Having scalable administration processes is essential.”

The Future of COBRA and Healthcare Continuation

While COBRA has provided important protections for over 35 years, the law faces ongoing debates about its effectiveness and relevance in the modern healthcare landscape.

Challenges with Current COBRA Structure

Critics point to several challenges with COBRA as currently structured:

Affordability: The requirement that beneficiaries pay 102% of full premium costs makes COBRA prohibitively expensive for many people, particularly those who lost their jobs and lack steady income.

Limited Duration: The 18-month standard coverage period (36 months for certain qualifying events) provides only temporary protection. Individuals with chronic conditions or long-term medical needs may exhaust COBRA coverage before securing alternative insurance.

Administrative Complexity: The strict notification requirements and complex administrative rules create compliance challenges, particularly for smaller employers.

Awareness Gaps: Many employees don’t fully understand their COBRA rights or the availability of more affordable alternatives through the Marketplace.

Potential Reform Directions

Various reform proposals have been discussed, though none have been enacted:

Subsidized COBRA: Some proposals would provide government subsidies to make COBRA more affordable. The American Recovery and Reinvestment Act of 2009 temporarily subsidized 65% of COBRA premiums during the Great Recession.

Extended Coverage Periods: Proposals to extend coverage beyond 18 months for certain circumstances, particularly involving older workers approaching Medicare eligibility.

Enhanced Marketplace Integration: Better coordination between COBRA and Marketplace coverage to help individuals understand all available options and make informed choices.

For international companies, staying informed about potential COBRA reforms and their implications for benefit administration is important for long-term compliance planning.

Key Takeaways for International Employers

COBRA represents a critical piece of the US employee benefits landscape that international companies must master. Here are the essential points to remember:

COBRA is mandatory, not optional. If you have 20 or more employees and offer group health insurance, you must comply with COBRA. State laws may impose similar requirements on smaller employers.

Notification timing is critical. The 30-day and 14-day notification deadlines are strict. Late notices can result in significant penalties and extended liability.

Each qualifying event triggers different rights. Terminations provide 18 months of coverage, while events like divorce provide 36 months. Understanding which rules apply to each situation is essential.

Administration is ongoing. COBRA obligations continue for months or years after employment ends, requiring systems for tracking beneficiaries, sending invoices, monitoring payments, and managing coverage.

Penalties are severe. The combination of excise taxes, DOL penalties, and potential lawsuits creates substantial financial exposure for non-compliance.

Alternatives exist. Qualified beneficiaries should always compare COBRA against Marketplace coverage, Medicaid, and spousal coverage before electing COBRA.

Expert support matters. Given COBRA’s complexity and severe penalties, working with experienced administrators—whether internal specialists or external TPAs—protects your company from costly mistakes.

Your Path to COBRA Compliance

For international companies expanding to the US, COBRA compliance doesn’t have to be overwhelming. With proper planning, clear procedures, and expert support, you can meet your obligations while protecting your business from liability.

At Foothold America, we’ve helped hundreds of international companies navigate COBRA requirements as part of their US expansion journey. Whether you’re hiring your first US employee or scaling to hundreds of workers, we provide the expertise and support you need to handle COBRA compliance confidently.

Ready to learn more about how Foothold America can support your US expansion? Contact our team of specialists today to discuss your specific situation and discover how our comprehensive services can simplify your American operations.