Determining if COBRA Coverage Is Right for Your Business

What you need to know.

Grow Your Business, Not Your Inbox

Stay informed and join our daily newsletter now!
1 min read
Opinions expressed by Entrepreneur contributors are their own.

What does COBRA mean to you? No, it's not a poisonous snake coming back to bite you. The Consolidated Omnibus Budget Reconciliation Act (COBRA) extends health-insurance coverage to and dependents beyond the point at which such coverage traditionally ceases.

For employees, COBRA means an extension of up to 18 months of coverage under your plan even after they quit or are terminated by your company (provided the reason for termination isn't gross misconduct). Employees' spouses can obtain COBRA coverage for up to 36 months after divorce or the death of the employee, and children can receive 36 additional months of coverage when they reach the age at which they are no longer classified as dependents.

The good news: Giving COBRA benefits shouldn't cost your company a penny. Employers are permitted by to charge recipients 102 percent of the cost of extending the benefits (the extra 2 percent covers administrative costs). The federal COBRA plan applies to all companies with more than 20 employees. However, many states have similar laws that pertain to much smaller companies.

Excerpted from Start Your Own Business, 2nd edition: The Only Start-Up Guide You'll Ever Need

More from Entrepreneur

We created the SYOB course to help you get started on your entrepreneurial journey. You can now sign up for just $99, plus receive a 7-day free trial. Just use promo code SYOB99 to claim your offer.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
From business to marketing, sales, design, finance, and technology, we have the top 3 percent of Experts ready to work for you. Join the future of work and learn more about our Expert solutions!

Latest on Entrepreneur