Mini-COBRA: When Your Employer Is Too Small for Federal COBRA

Where the 20-employee line comes from

Federal COBRA applies to employers that had 20 or more employees on more than half their typical business days in the previous calendar year. Congress drew that line to avoid imposing the administrative burden on very small businesses. The effect is that the people least likely to have savings, working for the smallest firms, fall outside the federal safety net.

Most states responded by passing their own continuation statutes to fill the gap. These are commonly called mini-COBRA laws. They are real, enforceable rights, and they are systematically under-used because the conversation usually ends when HR says "we are too small for COBRA." That sentence is often true and almost never the whole answer.

How state continuation typically differs

These laws are written state by state, so the details vary more than anything in this guide. What follows is the shape of the differences, not a rule for your state. Check yours before relying on any of it.

That last row is the one to act on today. Do not assume you have the familiar 60 days. Several states run much tighter windows, and unlike federal COBRA there is no single national rulebook to fall back on.

The question almost nobody asks: is the plan self-funded?

This is the part that decides whether your state's law can help you at all, and it is rarely explained anywhere.

There are two ways an employer can provide health coverage. In a fully insured plan, the employer buys a policy from an insurance company and the insurer carries the risk. In a self-funded plan, the employer pays claims out of its own money and usually hires an insurance company to administer the paperwork.

State insurance law regulates insurance policies. Self-funded employer plans are governed by federal ERISA rules, and state insurance mandates generally cannot be applied to them. So a state continuation statute, which works by imposing requirements on insurance policies, typically cannot reach a self-funded plan. A small employer that self-funds can therefore sit outside federal COBRA because it is too small, and outside state continuation because it is self-funded.

Self-funding is more common among small employers than most people expect, particularly through level-funded arrangements marketed to businesses with as few as a couple of dozen staff. You cannot tell from your insurance card. The card will carry a familiar insurer's logo either way, because that insurer may be acting only as the administrator.

How to find out which you have

• Ask HR directly: "Is our health plan fully insured or self-funded?" It is a normal question and they should know.
• Look at the plan documents. A Summary Plan Description for a self-funded plan usually names the employer as the plan sponsor and the insurer as claims administrator or third-party administrator, rather than as the insurer.
• Look for the words "administrative services only", "ASO", or "level funded", which all indicate self-funding.
• Ask the carrier. If the state law is carrier-administered, they will tell you quickly whether your group is one they can continue.

Checking your own state, without getting sold to

We are not going to print a fifty-state table here. Continuation statutes get amended, and a stale table that looks authoritative is worse than no table, because you would rely on it. The reliable route takes about ten minutes.

1. Go to your state Department of Insurance. The National Association of Insurance Commissioners maintains a directory of every state regulator. These are the offices that write and enforce the rules, and they have consumer helplines.
2. Search their site for "continuation" rather than "COBRA", since the state term is usually different.
3. Call the consumer assistance line if the website is unclear. Give them your employer size, your state, and whether the plan is fully insured.
4. Use your SHIP if you are near 65. The State Health Insurance Assistance Program gives free counselling from people who cannot earn a commission on your decision.

Notice what is not on that list: typing your details into a comparison site. Every organisation above is a regulator or a government-funded counselling service, which is the point.

What to ask, once you have the right person

• Does my state's continuation law apply to an employer of this size?
• Does it apply to a fully insured plan only, and is mine fully insured?
• How long can I continue coverage, and from what date is that measured?
• What percentage of the premium can I be charged?
• How many days do I have to elect, and when does that clock start?
• Who do I send the election and the payment to, the employer or the carrier?
• Can my spouse and children elect separately from me?
• Does anything change if I later become eligible for Medicare or another group plan?

One more thing state law sometimes does

A handful of states go further than filling the small-employer gap. Some allow continuation to run on after federal COBRA has been exhausted, and some provide extended rights for particular groups, such as older spouses losing coverage when the employee moves to Medicare. If you are approaching the end of an 18-month federal continuation and are not yet 65, it is worth asking your state regulator whether anything extends past that point before assuming the cliff is real.

If no continuation right applies to you

This is not the dead end it feels like, and in many cases it is financially the better outcome anyway.

• The Marketplace window is unconditional. Losing job-based coverage triggers a 60-day Special Enrollment Period whether or not you had any continuation right. Continuation and the Marketplace are alternatives, not a sequence, and for many people on a reduced income the subsidised plan is cheaper than continuing at 102%. See COBRA vs the Marketplace.
• Medicaid has no enrollment window. You can apply at any time of year, and eligibility is based on current monthly income, which may have changed sharply. In many states coverage can be backdated for a period before the application.
• A spouse's employer plan has its own window, and it is short. Losing your coverage usually lets you join their plan outside open enrollment, but the window is commonly around 30 days rather than 60. Check this first, because it expires soonest.
• A child under 26 can generally go back onto a parent's plan.

Whichever route applies, get the comparison number first. The calculator will estimate what continuing your existing plan would cost, and the deadline guide explains which clocks are already running.