COBRA and state continuation coverage guide
This article is for employers and employees who need to understand COBRA and state continuation requirements.
About COBRA and state continuation
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and state continuation (i.e., Cal-COBRA) let employees keep their health coverage under their company’s group plan. Employees can use this coverage after they leave the company or change from full-time to part-time work.
COBRA applies to employers with 20 or more employees. State continuation (also called “mini-COBRA”) typically applies to employers with fewer than 20 employees.
Note: As an employee, you do not have to enroll in continuation coverage. You can shop for plans on the individual market instead. You can also enroll as a dependent on a spouse’s or parent’s plan if you qualify. Losing current coverage counts as a qualifying life event, so you can enroll outside of the open enrollment period.
State continuation coverage (also called ”mini-COBRA”) continues the same coverage an employee had as an active employee. The employee’s plan information and insurance cards stay the same. The only difference is that the employee must pay the entire premium. This includes any administrative fees the carrier charges (policies vary by carrier).
State continuation generally applies to companies with fewer than 20 full-time employees and FTEs for 50% of their working days in the previous calendar year.
If federal COBRA does not apply to a company, state continuation usually does. This depends on the state where a company’s insurance plans come from.
In California, state continuation is called Cal-COBRA. Go to the Cal-COBRA section for more details.
State continuation law makes coverage retroactive to the day after the employee lost coverage. This means no gap in coverage.
Employees can still submit claims for eligible expenses while they wait for coverage to start.
We’ll automatically determine if state continuation applies to a company based on the state’s laws.
Not all states offer dental and vision coverage under state continuation.
You must offer state continuation coverage for at least the minimum time your state or federal law requires.
State continuation as part of severance
We give you and your former employee all the details about premium payments and due dates. This follows state law. If you and your former employee agree on a different payment plan, you must set it up and manage it directly with them.
How to pay state continuation premiums
Your former employee stays on your company’s invoice. You collect premiums from them. Then you send these funds to the insurance carrier. Former employees send their premium funds directly to you. You then send these funds to the carrier through your monthly invoice. Your former employee stays on your group’s carrier invoices.
We do not accept payments from former employees.
We cannot facilitate alternate payment methods.
If your former employee does not pay
Your former employee stays on your company’s invoice. You must collect their premiums each month.
If your former employee does not pay their premium, email us right away at [email protected]. We’ll try to end their coverage back to the date they missed payment.
Once the carrier processes the termination, you may get reimbursed. This usually shows as a credit on your statement in 1 - 2 billing cycles.
If you do not tell us quickly that the employee missed a payment, you may have to pay those costs. This happens if the carrier will not let us cancel coverage back to the date you requested.
FAQs
Q: How do I check if someone is active on state continuation?
A: To view continuation participants in Gusto:
Go to Benefits.
Select the Medical tile.
Scroll to the bottom of the page to find a list of your company's continuation participants.
Q: Who do I contact if there’s a problem with state continuation?
A: Email [email protected] if you cannot find the answer in this article. Include the employee’s name and describe the problem.
Q: What should I do if my former employee misses a payment?
A: Contact us at [email protected] right away. Tell us the employee’s name and how many months they missed. We’ll then ask the carrier to cancel their coverage. Most carriers only cancel coverage going back 30 - 60 days. Tell us as soon as payment is missed to avoid extra charges.
Q: What happens if my company ends benefits or closes?
A: Carriers let people stay on state continuation until your company’s plans end. If you cancel your company’s plans with the carrier, people on state continuation lose coverage too.
Q: What happens if I switch carriers while someone is on state continuation?
A: Our renewals team will offer any continuation participants a chance to choose state continuation on a similar plan with the new carrier. If they do not respond during renewal, their coverage ends on the renewal date.
Your plan coverage remains the same, but you now pay 100% of the cost. The cost includes your plan’s premium plus an administrative fee (which varies by state and carrier). If you choose to enroll, you and your former employer handle payment outside of Gusto. In states where carriers allow Gusto to handle enrollment, you can enroll and view your continuation coverage costs on the Benefits page of Gusto. To see quotes, go to the Enroll section and check the box next to your name and any dependents you want to continue coverage for.
Because insurance carriers charge an administrative fee for continuation coverage, you may find lower-cost plans in your state’s individual market. We recommend our partner, Stride, as a resource to help you shop the individual market. They help with enrollment and find subsidies you may qualify for. Stride also offers an online portal for changing coverage, making payments, and renewing your plans.
You can only enroll in the coverage you had when you left your job. For example, if you waived dental coverage before, you cannot enroll in dental coverage now.
However, if you had more than one type of coverage (like medical and dental), you can choose which types to keep. For example, you can continue medical coverage and drop dental coverage.
If you had benefits and leave your company, here’s what happens:
Getting your notice
We email you 3 business days after your last day. This email tells you about your rights to continue coverage at your own expense. You can find the full notice on the Documents page of your Gusto account.
The notice explains what types of coverage you can continue and how long coverage can last. This is based on state law. Dental and vision may not be available in every state.
If you do not see a notice in your account within 3 days, email us at [email protected].
How to enroll
If you want to continue your coverage, check the notice for next steps.
In states where carriers allow Gusto to submit your enrollment, you can enroll right from the Benefits page. Otherwise, follow the instructions in the notice to submit your enrollment to the carrier.
Watch your enrollment deadline. You usually have 30 – 60 days after you lose coverage to enroll.
Payment process
Once your coverage is reactivated, you’ll send a check with your premium amounts to your company (or carrier, if needed). Your company’s benefits admins will get a detailed email with information about your enrollment.
When your coverage starts
Once we confirm you qualify for state continuation, you should not have a gap in coverage. We get a continuation notice, and the carrier usually activates your coverage in 5 - 7 business days.
Once active, the carrier reinstates your coverage back to the first day you lost it. This means you will not have a gap in coverage.
Even though your coverage is not active yet, you can still submit claims for eligible expenses while you wait. This follows the carrier’s policies.
Dental and vision may not be available in every state.
Your insurance card
You can still use the same insurance card once we confirm your coverage is active.
If your company switches carriers during renewal and you enroll with the new carrier, you may get new insurance cards.
State continuation as part of severance
We give you and your former employer details about premium payment amounts and due dates. This follows state law. If you and your former employer agree on a different payment plan, you must set it up and manage it directly with them.
Cancel state continuation coverage
To cancel your continuation coverage, email [email protected] as soon as possible. Typically, your last day of coverage will be the last day of the month in which you requested the cancellation.
Extending coverage
Your state determines how long state continuation coverage lasts. We cannot extend coverage, but you have other options.
You may qualify for more affordable plans through the health insurance marketplace. You may also qualify for subsidies to lower your costs. Our partner Stride works directly with Healthcare.gov and state marketplaces. They help you find the best plans and make sure you get any subsidies you qualify for. Learn more and compare plans here.
Renewal process
If your company renews with a fully insured plan, you can still enroll in coverage. You’ll get a DocuSign to review and select renewal plans for your former employer’s group renewal. Your rates may change during the group renewal period. The open enrollment document shows your updated monthly premiums.
FAQs
Q: How do I know when my state continuation eligibility period ends?
A: In your Gusto account, you can find your eligibility dates on the Benefits page. Once we process your enrollment, you’ll also get a confirmation email with the end date.
Q: Do I need to contact Gusto to cancel at the end of my eligibility period?
A: We automatically cancel your benefits at the end of your state continuation eligibility period.
Q: Do I need to contact Gusto to cancel early (before the end of the eligibility date)?
A: If you want to cancel your state continuation coverage early, email us at [email protected] with the requested last day of coverage as soon as possible. We’ll start the termination process. Most carriers require cancellation at the end of the month. Your coverage may continue until then. We may contact you if we need more information to process the cancellation.
Q: What happens if I miss a payment?
A: You must send your premium payments to your former employer by the first of the month. If your former employer tells us you missed a premium payment, we’ll cancel your coverage with your carriers.
If you do not pay your premiums, your coverage will not automatically cancel. The carrier will still bill your company for the charges. You must contact us if you want to cancel coverage. To contact us, sign in to your Gusto account and click the help icon 
in the top-right corner of the page.
Q: Can I cancel coverage for some family members but keep others?
A: You can email [email protected] to cancel coverage for yourself or any dependents on your plan. You can cancel coverage for only your dependents while keeping your own coverage. This works as long as you have not reached the end of your eligibility period.
Q: Can I restart coverage if I cancel early?
A: Each carrier sets its own rules for reinstating continuation coverage after you cancel it. Most carriers will not let you restart coverage if you request cancellation and then change your mind after 30 days.
Q: Can I extend past my eligibility date?
A: No. Once your eligibility period ends, you cannot extend your continuation coverage.
Q: What are my options after state continuation ends?
A: You can enroll in coverage through the individual marketplace. You can also contact Stride. They may help you navigate your options. You may also gain coverage through a new job.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal program. It lets employees temporarily continue their health insurance when they lose employer-sponsored coverage. Employers with at least 20 full-time or full-time equivalent employees are required to offer COBRA as part of their group health plan.
Learn more about COBRA from the US Department of Labor’s website.
We provide a COBRA administrator, Anuvi, to companies that must offer COBRA. This makes sure you handle employees correctly. If you offer benefits with Gusto, this service has no additional cost. If you use the broker integration, the cost is $30 per company per month.
If you choose not to use Anuvi, you must find a third-party administrator to handle all aspects of COBRA.
Employees who choose federal COBRA stay on your company’s carrier invoice. Anuvi collects funds from COBRA participants each month. Then Anuvi forwards the funds to you (by check or ACH). You then pay the total invoice directly to the carrier.
Your company may still qualify for federal COBRA even if you have fewer than 20 full-time employees. This happens if your part-time employees work enough hours to meet a certain threshold.
We count each part-time employee as a fraction of a full-time employee. Then we add them to your FTE total. Calculate your FTE total here.
If you had benefits and leave your company, here’s what to expect:
After your last day of work, Anuvi sends a continuation notice to both your home address and the email address in your Gusto account. The notice explains your rights and next steps to continue your current coverage.
You have 60 days to enroll. This starts from the date you lost coverage or the date you received the COBRA election notice (whichever happens last). Follow the instructions in the continuation notice to enroll. Contact your insurance carrier if you have questions.
You can only enroll in the types of coverage you had when you left your job. For example, if you waived dental coverage before, you cannot enroll in dental COBRA coverage.
Open enrollment with COBRA
Each year, your former employer may update their benefits during open enrollment. As a COBRA enrollee, you have the same open enrollment rights as similarly situated active employees.
How you get your notice and how long you have to make changes
When open enrollment begins, Anuvi sends you plan options, new rates, and the enrollment deadline by both mail and email. Open enrollment timing varies by employer. It may not line up with the exact timing of open enrollment for active employees, but you'll usually have about two weeks. Your notice will include the exact dates for your open enrollment period.
What changes you can make
During open enrollment, you may make the same updates available to active employees. This includes:
Switching to a different medical, dental, or vision plan (if multiple options exist)
Adding or removing dependents, as allowed by the plan
Dropping coverage you no longer want
Enrolling in newly offered plans or benefits, if available
Any elections you make will apply to your COBRA coverage for the new plan year, just as they do for active employees.
Company size determines whether employers must offer federal or state continuation coverage. Small California companies that must offer state continuation use Cal-COBRA. Cal-COBRA lets employees keep their health insurance after they leave the company.
Here’s how the Cal-COBRA timeline works:
The employee leaves or becomes ineligible.
The company dismisses the employee, or the employee becomes ineligible for benefits.
We send a continuation notice (if applicable).
If Gusto is the company’s benefits broker and the employee had coverage, we email the employee when their continuation notice is ready. Employees can find it on the Documents page of their Gusto account.
If the company offers benefits through another broker, the employer should contact that broker directly with Cal-COBRA questions.
Former employees can still access their Gusto account as long as they can access their sign-in email.
The carrier sends an enrollment form.
The insurance carrier sends the employee an enrollment form 7 – 10 days after their original coverage ends.
The employee chooses a coverage option.
The employee can either enroll in Cal-COBRA or find a new plan on the individual marketplace.
To enroll in Cal-COBRA: The employee follows the instructions on the form to submit enrollment directly to the insurance carrier. We cannot help with enrollment, so employees should contact the carrier directly with any questions.
To shop for another plan: Carriers charge a 10% administration fee for Cal-COBRA, so we encourage employees to check other options. We partner with Stride to help people find individual health insurance as an alternative to continuation coverage. Stride helps with enrollment and finds subsidies employees may qualify for.
The employee tracks the renewal date (if enrolled).
If the employee enrolls in Cal-COBRA, they should find out the company’s renewal date for the coverage. Carriers do not tell Gusto who enrolls in Cal-COBRA. If the employee wants to stay enrolled in continuation coverage after the company’s renewal date, they should email [email protected] 1 – 2 months before the company’s renewal date. We’ll make sure they have access to the new plan year’s benefits.
The health insurance carriers handle Cal-COBRA directly. Follow the instructions below to contact your carrier and submit your enrollment. Reach out to your insurance carrier with any questions.
You must enroll and confirm coverage details directly with the insurance carrier. We included carrier info below for your convenience, but check with your carrier for the most up-to-date enrollment instructions.
Aetna
Call Aetna’s member services line at the number on the back of your ID card. Request your Cal-COBRA enrollment packet and confirm your mailing address. Make sure to say you’re asking about the Cal-COBRA enrollment process. The packet normally takes 10 - 12 business days to arrive. If you have not received it after 12 business days, you can call (800) 297-7145. Once you receive the packet, fill out the forms and return them to Aetna. You’ll work with Aetna directly for all billing and enrollment. If you have any questions, call Aetna’s member services line.
Anthem
Anthem automatically sends a Cal-COBRA letter to your mailing address after your last day of coverage. If you did not receive the letter, you can call (855) 854-1429 and request the letter be emailed to you. Once you receive the form, complete it and email it back to Anthem at [email protected]. If you have any questions, call Anthem at (855) 854-1429.
Beam Dental
Beam mails your Cal-COBRA enrollment packet to the mailing address that they have on file. Once you receive this packet, you can email [email protected] or call (800) 648-1179 to enroll or ask any questions. Beam will set up an open enrollment for you. This is their policy for all Cal-COBRA enrollees.
Blue Shield of California
Email [email protected] to request your Cal-COBRA packet. Blue Shield of California will then send it to your mailing address. Once you receive the packet, fill out the forms and email them to [email protected] AND [email protected]. To follow up, ask questions, or speed your enrollment, call (800) 228-9476. Tip: If you enter your Social Security number and date of birth, then ignore all prompts and say “other reason,” you’ll connect to a representative.
California Choice
CalChoice handles Cal-COBRA through a third party called Conexis WageWorks. After your termination, they should have sent paperwork to your mailing address. This lets you sign up with Conexis. If you have any questions or have not received the paperwork, you can call CalChoice member services at (800) 558-8003.
CoPower
CoPower sends you a Cal-COBRA packet to the mailing address that they have on file. Follow the instructions in the packet to enroll. You can call CoPower’s member services at (888) 920-2322 with questions or to speed up your enrollment.
Covered California
Covered California sends a Cal-COBRA packet to your mailing address 10 – 14 days after they process your termination or reduced hours. Follow the instructions in the packet to submit your enrollment. Contact Covered California with questions at [email protected] or (877) 453-9198.
Delta Dental
Your dental Cal-COBRA coverage costs 110% of your normal premium each month. Contact the carrier with any questions at (415) 989-7443 or [email protected].
Guardian
Email [email protected] to request your Cal-COBRA packet. Guardian will send it to your mailing address. Once you receive the packet, fill it out and email it to Guardian at [email protected]. To follow up, ask questions, or speed up your enrollment, you can contact Guardian at 800-541-7846 or [email protected].
Health Net
Your Cal-COBRA coverage costs 110% of your normal premium each month. If you have any questions, call Health Net at (800) 224-8808 or the number on the back of your insurance card.
Kaiser Permanente
You can call Kaiser member services at (800) 464-4000 to let them know you’re interested in coverage and to request your Cal-COBRA packet. Make sure to say you’re asking about the Cal-COBRA enrollment process. If you have any questions, contact Kaiser at the number above.
MetLife
Once you receive your Cal-COBRA packet, return the attached form to [email protected]. If you have any questions, you can reach MetLife at (800) 275-4638 or (800) 942-90854.
Principal
Principal automatically sends your Cal-COBRA forms when you leave. Follow the instructions in the packet to enroll. Contact Principal with any questions at (800) 843-1371.
Sharp Health Plan
Sharp Health Plan mails your Cal-COBRA forms to the address we have on file. Once you receive the forms, follow the instructions in the packet to enroll. If you have any questions, email [email protected].
UnitedHealthcare
Your Cal-COBRA notice generates automatically within 5 business days of your termination. UnitedHealthcare sends it to your mailing address. Once you receive it, you can go to the UHC website to register and make payments. Call (866) 747-0048 with any questions.
VSP
VSP sends your Cal-COBRA packet to the mailing address they have on file. Once you receive it, follow the instructions in the packet to enroll. If VSP says that we must send an enrollment form on your behalf, let us know at [email protected]. If you have any questions, call VSP’s member services at (800) 877-7195.