Short answer: federal COBRA applies to a Michigan employer that had 20 or more employees on more than half of its typical business days in the prior calendar year. It lets employees and covered family members keep the group health plan after a qualifying event, usually for 18 or 36 months, at up to 102% of the full premium. Michigan has no state continuation law for smaller employers, so employees of groups under 20 usually move to individual coverage instead.
Key takeaways
- The 20-employee test uses the prior calendar year, and part-time employees count as fractions.
- 18 or 36 months. Job loss and reduced hours give 18 months; death, divorce, Medicare entitlement and a child aging out give dependents 36.
- Deadlines stack: 30 days for the employer to notify the plan, 14 days for the election notice, 60 days to elect, 45 days to pay.
- No Michigan mini-COBRA. Small-group employees rely on individual coverage and a special enrollment period.
Which employers must offer COBRA
COBRA applies to group health plans of private employers and state and local governments that had 20 or more employees on more than 50% of their typical business days in the previous calendar year. Full-time and part-time employees both count, with each part-time employee counted as a fraction based on hours worked. Companies under common ownership are counted together.
COBRA covers medical, dental, vision, prescription and health FSA and HRA coverage. It does not apply to life or disability insurance. Church plans and federal government plans are exempt.
For an employer with fewer than 20 employees, Michigan has no state continuation law that fills the gap, although a policy issued in another state may carry that state’s rules. Employees who lose coverage can buy individual coverage during a 60-day special enrollment period. See state continuation and mini-COBRA and benefits continuation for employers under 20 employees.
Qualifying events and how long coverage lasts
| Qualifying event | Who can elect | Maximum coverage |
|---|---|---|
| Termination of employment, other than for gross misconduct | Employee, spouse, dependent children | 18 months |
| Reduction in hours that ends eligibility | Employee, spouse, dependent children | 18 months |
| Death of the employee | Spouse, dependent children | 36 months |
| Divorce or legal separation | Spouse, dependent children | 36 months |
| Employee becomes entitled to Medicare | Spouse, dependent children | 36 months |
| Child loses dependent status under the plan | Dependent child | 36 months |
Two extensions apply. If the Social Security Administration determines a qualified beneficiary was disabled within the first 60 days of COBRA coverage, everyone in the family can extend from 18 to 29 months. A second qualifying event during the first 18 months, such as a divorce, can extend a spouse or child to 36 months in total.
Every notice and deadline
| Step | Who acts | Deadline |
|---|---|---|
| General (initial) notice of COBRA rights | Plan administrator | Within 90 days after coverage begins |
| Notice of qualifying event (termination, reduced hours, death, Medicare) | Employer to plan administrator | Within 30 days of the event |
| Notice of divorce, separation or child losing dependent status | Employee or family member to plan | Within 60 days of the event |
| Election notice | Plan administrator to qualified beneficiaries | Within 14 days of being notified (44 days if the employer is the administrator) |
| Election | Qualified beneficiary | At least 60 days from the later of the notice or loss of coverage |
| First premium payment | Qualified beneficiary | Within 45 days after electing |
| Ongoing premiums | Qualified beneficiary | 30-day grace period after each due date |
| Notice of early termination or unavailability | Plan administrator | As soon as practicable |
Coverage is retroactive once a beneficiary elects and pays, so a person can wait most of the election period and still be covered from the day the plan coverage ended.
Michigan COBRA Compliance: Federal and State Requirements
The plan can charge up to 102% of the full cost of coverage, meaning the employer and employee shares combined plus 2% for administration. During a disability extension, months 19 through 29 can be charged at up to 150%. Employers may choose to subsidize COBRA, often as part of a severance agreement. For the employee side, including typical amounts and cheaper alternatives, see how much COBRA insurance costs or run the COBRA cost calculator.
Penalties for getting it wrong
- IRS excise tax: up to $100 per day for each affected qualified beneficiary, capped at $200 per day per family, self-reported on Form 8928.
- ERISA statutory penalty: a court can award up to $110 per day to a participant who did not receive a required notice.
- Claims liability: an employer that fails to offer COBRA can end up paying the medical claims the plan would have covered.
Most problems come from the same place: a termination reaches payroll but not the person responsible for COBRA, so the 30-day clock runs out unnoticed.
How employers keep COBRA clean
- Tie COBRA notification to the same offboarding step that ends coverage, so every termination triggers it.
- Use a COBRA administrator, or confirm your carrier’s service covers every notice above.
- Keep proof of mailing for every general and election notice.
- Track elections, payments and grace periods in one place, and end coverage promptly when payment stops.
- Review the list of former employees on COBRA at every renewal, since they affect claims and rates.
See COBRA administration and COBRA notices and elections.
Frequently asked questions
Does COBRA apply to small employers in Michigan?
Federal COBRA applies only to employers with 20 or more employees on more than half of their business days in the prior year. Michigan has no state continuation law for smaller employers, so their employees usually buy individual coverage during a special enrollment period.
How long does COBRA coverage last?
Up to 18 months after job loss or a reduction in hours, and up to 36 months for a spouse or child after the employee’s death, divorce, Medicare entitlement or a child aging out. A disability determination can extend 18 months to 29.
How much can an employer charge for COBRA?
Up to 102% of the total premium, including both the employer and employee shares, or up to 150% during a disability extension.
When must the COBRA election notice be sent?
Within 14 days after the plan administrator learns of the qualifying event. When the employer is its own administrator, it has 44 days from the event.
How long does an employee have to elect COBRA?
At least 60 days from the later of the date coverage ends or the date the election notice is provided. Coverage is retroactive once elected and paid.
Does COBRA cover dental and vision?
Yes. COBRA applies to all group health plans, including dental, vision and health FSA and HRA coverage, but not life or disability insurance.
Want your COBRA process checked?
CFH Insurance Consultants is an independent employee benefits firm, founded in 2007. We are licensed insurance brokers, and for proper coverage of an account we work in teams of five: an account executive, an account manager, a plan analyst, customer service and IT. We will walk through how terminations reach your COBRA administrator, confirm every notice is going out on time, and show you what your current COBRA enrollees mean for your next renewal. Send us your renewal, call 248.370.8853, or book a 30-minute call.
Related reading: How much does COBRA cost? · State continuation and mini-COBRA · Employee notices
This article is general information, not legal advice. Plan documents and specific facts control; confirm with ERISA counsel before acting on a specific situation.
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