Benefits Q&A: How Should My Company Administer COBRA Coverage?

April 2, 2024

Unsure about how to start COBRA coverage for your company? Learn the pros and cons of self-administering versus using a vendor, plus tips for preparing as your company grows.

Benefits Q&A: How Should My Company Administer COBRA Coverage?

We are a young company with about 30 full-time employees but have plans to hire 100 more by mid-2025. I’ve recently been given responsibility for benefits administration. In educating myself for the role, I learned we are required to offer COBRA continuation coverage to individuals who lose their health insurance, which we haven’t been doing. This doesn’t come up often, but I want to be prepared when it does. Do you have any suggestions on where to start?  

I recommend you first decide whether to self-administer COBRA or utilize a COBRA administration vendor. For a company your size, it could honestly go either way. However, with your anticipated growth, I would recommend utilizing a COBRA administrator sooner rather than later. Here’s why.

COBRA administration requires more than just issuing an election notice to employees when they lose coverage. A variety of other notices are also required, including a General COBRA Notice for all employees who enroll in one of your group health plans (including medical, dental, vision, health FSA and potentially others). All required notices are subject to strict deadlines.

TIP: If you use a COBRA vendor, make sure they are issuing the General Notice to newly enrolled employees! Surprisingly, this is often overlooked because the vendor charges extra for this particular notice. You can also choose to issue the General Notice yourself, even if you use a COBRA vendor. Just make sure to include it in your onboarding materials and/or benefits enrollment system and retain documentation that it’s been provided.

Self-administration also requires you to:

  • Have a good understanding of which benefits are subject to COBRA, who is entitled to it, and when it should be offered. 
  • Calculate and collect premiums, usually from people who no longer work for you. If they don’t pay, there are detailed rules for how to cancel coverage due to nonpayment.

In light of your planned growth, why spend all the time and effort getting yourself up-to-speed on COBRA administration when you will likely need a vendor soon anyway? COBRA administration is not very expensive in the broad scheme of things. For a company of your size (30 employees), I would expect it to cost no more than $1.00 per employee per month (although some vendors have a minimum monthly charge, usually $50). The PEPM typically goes down as a company’s size goes up. Compared to the potential for costly lawsuits and IRS penalties for COBRA mistakes, your peace of mind is well worth the minimal vendor cost.

If you choose to self-administer for now, there’s a COBRA guide from the U.S. Department of Labor to help you get started.

About The Author

Julie Athey, J.D.

Julie Athey, J.D.
Email As Director of Compliance & Legal, Benefits, Julie has more than 20 years of experience in compliance and law. Julie provides in-depth hands-on compliance training, advice and consulting for benefits and HR professionals. She has authored numerous manuals for HR professionals – including FMLA Compliance: Practical Solutions for HR and Wage and Hour Compliance: Practical Solutions for HR. Julie is also a frequent presenter at seminars, webinars and audio conferences on a variety of benefits, employment law and human resources topics.