What's the difference between COBRA and State Continuation?

Most small business owners are familiar with COBRA. (The acronymn stands for “Consolidated Omnibus Budget Reconciliation Act, which sounds fancy but is quite a mouthful, so it is easier is to say “cobra,” not to mention the fact that it sounds cooler to do so). While guys of a certain age think of Cobra as the enemy of GI Joes, in the real world COBRA is the federal law that mandates that employees be given the option to maintain their group health insurance coverage after they leave the employer. Obviously, the now ex-employee now bears the full cost of coverage, but they must be given the opportunity to do so for up to 18 months, even if they have only been on the plan for one day as an employee.
GI Joe always kept Cobra at bayWhat many people do not realize, however, is that COBRA applies to groups with 20 or more employees on payroll (part-time workers do count, at least as a percentage, such that a part-time worker averaging 20 hours per week counts as .5). So if your business has less than 20 employees, you do not fall under COBRA guidelines and your employees are not entitled to these benefits. Instead, your business likely falls under something called “state continuation,” which does much the same thing, with a few differences. These differences may vary state to state. In South Carolina, an employee is only eligible for state continuation if he or she has been on the group plan for 6 months, and they can only keep it for up to 6 months.
In each case, you’re required to offer your employees COBRA or state continuation coverage, but if they accept,  your insurance carrier often takes care of the details. If you are an ex-employee considering taking COBRA or state continuation, check with us to see if an individual health insurance plan would be a better fit – it will almost certainly be less expensive.
For more information on COBRA, check out this FAQ from the Department of Labor.