What Makes You Not Eligible for COBRA Coverage?

You may not be eligible for COBRA if your former employer had fewer than 20 employees, if your coverage came from a government or church plan, if you weren’t actually enrolled in the group health plan on the day before your qualifying event, if you were fired for gross misconduct, if the employer eliminated all its health plans, or if you let the election or payment deadlines pass. Each of these is a distinct bar, and any one of them is enough to end the conversation.

Your Employer Had Fewer Than 20 Employees

Federal COBRA only reaches employers that had at least 20 employees on more than 50 percent of their typical business days during the prior calendar year.¹ Below that line, the company has no federal obligation to offer continuation coverage.

The count includes part-timers, but they count as fractions. Each part-time employee equals the hours they work divided by the hours required for full-time status, so someone working 20 hours a week at a company where 40 is full time counts as half an employee.¹ A company with 25 heads on payroll can still land under 20 once the math is done.

If you work for a small employer that misses the federal cutoff, check whether your state has a mini-COBRA law. Many states extend similar continuation rights to employees of smaller companies. Coverage periods run anywhere from a few months up to 36 months depending on the state and the qualifying event.

Your Plan Was a Government or Church Plan

Federal COBRA is part of ERISA, and ERISA does not cover plans sponsored by federal, state, or local governments or by churches. If your health coverage came through a government employer or a qualifying church plan, COBRA simply does not apply.² That doesn’t always leave you empty-handed. Many government employers run their own continuation programs that work much like COBRA, some state laws separately require it, and federal employees can often continue coverage through the Federal Employees Health Benefits Program after separation.

You Weren’t Actually Enrolled in the Plan

Being eligible to sign up for your employer’s plan is not the same as being covered by it. To count as a “qualified beneficiary” under COBRA, you must have been enrolled in the group health plan on the day before the qualifying event.¹ If you declined coverage at open enrollment or never signed up, there is nothing to continue.

The same rule reaches family members. Your spouse and dependent children have COBRA rights of their own only if they were covered under your plan the day before the qualifying event. A spouse listed on your plan gets independent rights; a spouse who carried separate insurance does not.

Spouses After Divorce or Legal Separation

Divorce and legal separation are qualifying events that can entitle a covered spouse to up to 36 months of continuation coverage, but the spouse must have been enrolled in the employee’s plan on the day before the divorce or separation. One exception matters: if the employee dropped the spouse from the plan in anticipation of the divorce, the spouse may still have COBRA rights. The plan administrator must be notified of the divorce or separation, and the plan must allow at least 60 days after the event for that notification.³

Children Aging Out of Dependent Status

When a dependent child loses eligibility under the plan’s terms, that is its own qualifying event carrying up to 36 months of COBRA.⁴ The child still had to be enrolled at the moment they aged out. A child never added to the plan has no COBRA rights to trigger.

You Were Fired for Gross Misconduct

Termination is normally a qualifying event, with one exception: an employer does not have to offer COBRA if you were fired for “gross misconduct.”⁴ Federal law does not define the term.⁵

Being fired for ordinary reasons such as poor attendance, mediocre performance, or personality conflicts does not qualify as gross misconduct.⁵ Courts have generally required something more severe, such as theft, workplace violence, deliberate sabotage, or conduct showing intentional disregard for the employer’s interests. The employer carries the burden of proving gross misconduct, and because the standard is unsettled, courts have reached different results on similar facts. Most employers err on the side of offering coverage unless the conduct is truly egregious.

If your employer denies COBRA on this ground and you disagree, you can challenge the denial. Courts evaluate the decision on the evidence the employer had at termination, not on information discovered later.

The Employer Ended All Health Plans

COBRA is a right to continue coverage under an existing group health plan. If the plan no longer exists, there is nothing to continue. When an employer stops offering any group health insurance to its active employees, COBRA becomes unavailable for everyone, including people who already elected it.⁶

Employer bankruptcy is the common setting. A Chapter 11 reorganization does not automatically kill health plans; the company may keep running them while restructuring. But if the employer liquidates or eliminates all health coverage, COBRA goes with it. If at least one health plan survives, you may be able to continue coverage under that remaining plan. Special rules may apply if you are a retiree receiving health benefits or if your benefits are governed by a collective bargaining agreement.⁷

You Missed the Election or Payment Deadline

Qualifying on paper is not enough. Missing a deadline ends your eligibility just as effectively as any statutory bar.

The 60-Day Election Window

After a qualifying event, the plan administrator must send you an election notice. You then have 60 days to elect COBRA, measured from the later of the date you would have lost coverage or the date the notice was provided.⁸ Let the 60 days pass and the offer expires permanently. There is no late enrollment and no appeal for a missed deadline.

Premium Payment Deadlines

After electing, you have 45 days to make your first premium payment. For each payment after that, the plan must allow a grace period of at least 30 days past the due date.⁹ Miss either deadline and the plan can terminate your coverage retroactively.

Premiums are steep. You pay up to 102 percent of the full plan cost, which includes the share your employer used to cover plus a 2 percent administrative fee.¹ That sticker shock is a common reason technically eligible people miss a payment or never elect.

Things That End COBRA After You Already Have It

Even after a valid election, several situations cut coverage short of the 18-month or 36-month maximum.¹⁰

You enroll in another group health plan that does not exclude you based on a preexisting condition.¹⁰
You become entitled to Medicare after your COBRA election, meaning actually enrolled in Part A or Part B rather than merely eligible. This is a different situation from the employee’s own Medicare entitlement being the qualifying event that opened COBRA for the spouse and dependents in the first place.
The employer stops maintaining any group health plan for its active employees.⁶
You stop paying premiums past the grace period.

What to Do If You Don’t Qualify

Losing job-based health insurance opens a Special Enrollment Period on the Health Insurance Marketplace, giving you 60 days to sign up for an ACA plan.¹¹ That is true whether the reason you don’t qualify for COBRA is employer size, plan type, or anything else.

Marketplace plans are often the better financial choice even when COBRA is available. COBRA premiums are not subsidized, but marketplace plans may qualify for advance premium tax credits based on your income. CMS has confirmed that being eligible for COBRA does not prevent you from enrolling in a marketplace plan or receiving subsidies, as long as you are not actively enrolled in COBRA when your marketplace coverage starts.¹²

If your income is low enough, you may also qualify for Medicaid. Medicaid eligibility does not affect your COBRA rights, but for most people, free or low-cost Medicaid makes paying a COBRA premium unnecessary.¹²

1
U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Employers and Advisers
2
Office of the Law Revision Counsel. 29 USC 1161 – Plans Must Provide Continuation Coverage to Certain Individuals
3
U.S. Department of Labor. Health Benefits Advisor – Former Spouse’s Employer Has 20 or More Employees
4
Office of the Law Revision Counsel. 29 USC 1163 – Qualifying Event
5
U.S. Department of Labor. Gross Misconduct – Health Benefits Advisor for Employers
6
U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Workers
7
U.S. Department of Labor. Your Employer’s Bankruptcy – How Will it Affect Your Employee Benefits?
8
eCFR. 26 CFR 54.4980B-6 – Electing COBRA Continuation Coverage
9
U.S. Department of Labor. An Employee’s Guide to Health Benefits Under COBRA
10
Office of the Law Revision Counsel. 29 USC 1162 – Continuation Coverage
11
HealthCare.gov. Getting Health Coverage Outside Open Enrollment
12
CMS. COBRA Coverage and the Marketplace