TL;DR

COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) is a federal law that requires employers with 20 or more employees to offer continued group health coverage to workers and their dependents after qualifying events such as job loss, reduced hours, or loss of dependent status. The coverage is real but expensive: the individual pays the full premium, including the employer's former share, plus a 2 percent administrative fee.

How COBRA Works

COBRA is not a separate insurance plan; it is the right to continue existing group coverage under the same plan the employer uses. When a qualifying event occurs, the plan administrator has 30 days to notify the employer, and the employer has 14 days to send a COBRA election notice to the qualified beneficiary. The beneficiary then has 60 days to elect coverage and 45 days after election to pay the first premium. Coverage is retroactive if elected within the window, which means a beneficiary can elect COBRA after incurring a medical expense and have it covered.

Qualifying events vary by beneficiary type. For employees, they include termination (except for gross misconduct), reduction in hours, and in some cases bankruptcy of the employer. For spouses and dependents, they include divorce or legal separation, the employee's death, the employee becoming entitled to Medicare, and a dependent child ceasing to qualify as a dependent under plan rules.

Coverage duration is typically 18 months for termination or hours reduction, extended to 29 months if the beneficiary is disabled, and 36 months for events affecting dependents (divorce, death, Medicare entitlement). Federal COBRA applies to employers with 20 or more employees. Many states have "mini-COBRA" laws that extend similar rights to employees of smaller employers.

Why It Matters for Recruitment

Recruiters encounter COBRA at two points: candidate conversations and client advisory discussions. On the candidate side, a professional switching from full-time employment to a contract role, or sitting between permanent jobs, will often ask about benefits. Understanding COBRA helps a recruiter explain the tradeoffs clearly: the candidate can maintain their existing coverage, but at full cost, which is typically $600 to $800 per month for individual coverage and $1,700 to $2,100 per month for family coverage.

For staffing agencies that place workers as W-2 employees, COBRA compliance is an operational requirement, not a choice. If an agency has 20 or more covered employees, it is a plan sponsor subject to COBRA. Missed notification deadlines carry penalties of $110 per day per qualified beneficiary. An agency that processes high volumes of short-term placements and terminations needs airtight COBRA administration, either in-house or through a third-party administrator.

COBRA also shapes candidate negotiation strategy. A candidate on COBRA is spending real money every month that a new employer's health benefits would eliminate. A recruiter who quantifies that cost ("you're paying $1,800 per month for family coverage; this employer's plan costs you $320") is solving a problem, not describing a perk.

In Practice

A staffing agency places a contract accountant for a 6-month engagement. The worker's prior employer's COBRA coverage costs $890 per month for individual coverage. The agency offers a group health plan option after 30 days of employment. The recruiter calculates that electing COBRA for the gap month and then enrolling in the agency plan costs the candidate approximately $890 total versus continuing COBRA for 6 months at $5,340. That $4,450 difference is a real dollar figure that influences whether the candidate accepts the contract. A recruiter who explains this with confidence closes placements that less informed recruiters lose to uncertainty.

Key Facts