The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and State Continuation are both laws that allow employees to continue health coverage under their company's group plan after they leave the company or have had their employment status change from full- to part-time.
Remember: if you do not want to enroll in continuation coverage, you can also shop plans on the individual market. If you’re eligible, you can also enroll as a dependent on a spouse or parent’s existing plan. The termination of your current coverage is a qualifying life event that allows you to enroll outside open enrollment.
State Continuation coverage (also called ”mini-COBRA”) is a continuation of the coverage employees had as an active employee, so none of the employee plan information or insurance cards will change. The only difference is that the employee alone is responsible for paying the premium in its entirety, without contribution from the employer (policies vary by carriers).
State continuation generally applies to companies with less than 20 full-time employees and FTEs for 50% of their working days in the previous calendar year.
Plan coverage remains the same, but the cost will now be 100% employee's responsibility. The cost includes the plan's premium plus an administrative fee. If an employee chooses to enroll, the payment between the employer and former employee is to be managed outside of Gusto.
Due to insurance carriers charging an administrative fee for continuation coverage, employees may find lower-cost plans with their state's individual market. Gusto recommends our partner, Stride, as a resource that helps people shop the individual market. They’ll help with enrollment and find subsidies that your employees may be entitled to. Stride also has an online portal where employees can change coverage, make payments, and renew their plans.
Employees are only eligible to enroll in lines of coverage they were actively enrolled in at the time of termination (i.e. if they previously waived dental coverage, they can’t enroll in dental coverage). However, if they were previously enrolled in more than one line of coverage (i.e. medical and dental) they can choose which lines to continue from the options available (i.e. continue medical and drop dental).
Employers are legally obligated to offer State Continuation coverage for at least the minimum period required by state or federal regulations.
State continuation coverage as part of a severance
Gusto will provide you and your former employee with details of all state continuation premium payment amounts and due dates, in accordance with state law. If you and your former employee have decided upon an alternative payment arrangement for state continuation coverage, it must be set up and managed directly with your former employee.
Pay State Continuation premium
The employee will stay on your company's invoice and the employer is responsible for collecting these premiums from the employee each month moving forward. Former employees will send their continuation premium funds to you, the employer, directly. You will then remit these funds to the carrier via your monthly invoice. The former employee will remain on your group’s carrier invoice(s).
If employee fails to pay
The dismissed employee will stay on the company's invoice and the employer is responsible for collecting these premiums from the employee each month moving forward.
If an employee fails to pay their premium, notify us as soon as possible by emailing us at [email protected]. Gusto will attempt to terminate the employee’s coverage retroactively to the date on which they failed to pay.
Once the carrier processes the termination, you may be reimbursed. This will typically show as a credit on your statement in 1-2 billing cycles.
If you do not inform us in a timely manner that the employee has failed to pay their continuation premiums by the due date, you may be responsible for those costs if the carrier doesn't allow a retroactive termination to the requested date.
How can I tell if a state continuation participant is active on my company's policy?
You can view continuation participants in Gusto:
Who do I contact if there is an issue with a former employee’s state continuation coverage?
Email [email protected] if your question is not answered in this article. Be sure to provide all relevant details, including the employee’s name and the nature of the issue.
What should I do if an employee misses a premium payment for their continuation coverage?
Contact us at [email protected] immediately with the name of the continuation participant who missed their payment and how many months they have missed payment. Gusto will then submit the employee’s termination of coverage to their carrier(s). Note that most carriers will only terminate back 30-60 days, so it is important to notify Gusto as soon as a payment is missed to avoid additional charges for the employee’s coverage.
What happens to state continuation participants if my company is terminating benefits or the business is closing?
Carriers will allow continuation participants to remain on insurance until the company's plans are terminated. If your company voluntarily cancels your company's plans with the carrier, the continuation participants will lose coverage as well.
What happens to continuation participants if my company is switching insurance carriers during their eligibility period?
Our renewals team will offer continuation participants a chance to elect continuation coverage on a similar plan with the new carrier. If the participant is unresponsive during the renewal outreach, their coverage will be canceled as of the renewal date.
If you were enrolled in benefits and leave your company, here’s what to expect:
Once you are confirmed qualified for state continuation, you should not have a gap in coverage. Gusto will receive a continuation notice and coverage can typically take 5-7 business days to become active with the carrier. Once active, coverage will be reinstated back to the first day you lost coverage to ensure you will not experience a gap in coverage. Even though coverage is not currently active with the carrier, claims for eligible expenses can still be submitted.
Dental and vision may not be available in every state.
Insurance card
You will still be able to use the same insurance card, as soon as Gusto has confirmed that coverage is active.
If your company experiences a carrier switch during a renewal period, and you are enrolled with the new carrier, you may receive new insurance cards.
State Continuation coverage as part of a severance
Gusto will provide you and your former employer with details of all state continuation premium payment amounts and due dates, in accordance with state law. If you and your former employer have decided upon an alternative payment arrangement for state continuation coverage, it must be set up and managed directly with your former employee.
Terminate State Continuation coverage
Reach out to [email protected] to terminate your continuation coverage.
As a reminder, most insurance carriers only allow end-of-month termination dates.
Extend coverage
State continuation coverage length is based on the state in which the group plans are written. We are unable to extend coverage, but you do have other options for coverage.
You may be eligible to enroll in potentially more affordable plans through the health insurance marketplace, and you may qualify for subsidies to reduce that cost further. Our partner Stride works directly with Healthcare.gov & state marketplaces to help you find the best plans for you, and ensure you receive any subsidies you qualify for. Learn more and compare plans here.
Renewal
If your company is renewing with a fully insured plan, you'll still be able to enroll in coverage. You will be sent a DocuSign where you may review and select renewal plan(s) for your former employer’s group renewal. Your rates are subject to change during group renewal. The open enrollment document will allow you to review your updated monthly premium(s).
How do I know when my state continuation eligibility period will end?
In your Gusto account, the eligibility dates for state continuation should be listed under the Benefits tab. You will also receive a confirmation email including the end date once Gusto has processed your enrollment in continuation coverage.
Do I need to reach out to Gusto to terminate at the end of my eligibility period?
Gusto will automatically terminate your benefits at the end of the eligibility period for state continuation.
Do I need to contact Gusto to terminate my continuation coverage early (before the end of the eligibility date)?
If you'd like to terminate your state continuation coverage early for any reason, contact us at [email protected] with the requested last day of coverage. Note that most carriers require cancellation at the end of the month, and your coverage may continue coverage until that time.
Will my state continuation be terminated if I miss a payment?
You are responsible for submitting premium payments to your former employer by the first of the month. If we're notified by your former employer that you have missed a premium payment, we will process a termination of coverage with your carrier(s). Failing to pay your premiums will not automatically terminate your coverage, as the carrier will still bill your company for the charges. You must contact Gusto if you wish to end coverage.
Can I terminate family members from my continuation policy while still keeping others active?
You may reach out to [email protected] to request termination for yourself or any dependents on your plan. You may terminate only dependents from your plan while keeping yourself active as long as you have not reached the end of eligibility.
Can I restart state continuation coverage if I voluntarily cancel it early?
Each carrier determines their rules for reinstating continuation coverage after it has been terminated for any reason. Most carriers will not allow reinstatement after a cancellation request has been made after 30 days.
Can my state continuation be extended past the end of the eligibility date?
No, once your eligibility period has expired you will not be able to extend your continuation coverage.
What are my options for coverage after my state continuation is terminated due to end of eligibility?
You can enroll in coverage through the individual marketplace. Contact Stride who may be able to help you navigate your options, or you can gain coverage through new employment.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal program that provides temporary continuation of health insurance when employer-sponsored coverage is lost. Employers with at least 20 full-time (or full-time equivalent) are required to offer COBRA as part of their group health plan.
Learn more about COBRA from the US Department of Labor's website.
Gusto provides COBRA administrator, BASIC, companies subject to COBRA to make sure that employees are handled correctly. For companies who offer benefits with Gusto there is no additional cost. For companies using the broker integration, this is $30 per company per month.
If your company chooses not to use BASIC, you’ll be responsible for finding a third-party administrator to handle all aspects of COBRA.
Employees who opt into Federal COBRA will continue to be on your company's carrier invoice. BASIC will collect the funds from COBRA participants each month and forward them to the company (by check or ACH) so your company can pay the total invoice directly to the carrier.
If you were enrolled in benefits and leave your company, here’s what to expect:
Depending on size, companies are either subject to federal or state continuation coverage. For small California companies subject to state continuation, Cal-COBRA is a way for employees to continue health insurance after they leave the company.
Here's how the Cal-COBRA timeline works:
If you enroll in Cal-COBRA: Make sure to find out what your company’s renewal date is for the coverage. The carriers do not inform Gusto about who is enrolled in your company’s Cal-COBRA, so reach out to us if you want to stay enrolled in continuation coverage after your company’s renewal date. Email [email protected] 1–2 months before your company’s renewal date and we’ll make sure you have access to the new plan year’s benefits.
Cal-COBRA is administered directly through the health insurance carriers, so follow the instructions below to submit your enrollment. Reach out to your insurance carrier with any questions.
Employees are responsible for enrolling and confirming coverage details directly with the insurance carrier. We've included carrier info below for your convenience, but refer to 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 to request your Cal-COBRA enrollment packet and confirm your mailing address. Make sure to specify that you’re asking about the Cal-COBRA enrollment process. The packet normally takes 10-12 business days to arrive. If you haven’t 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 didn’t 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 will mail 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, which is their policy for all Cal-COBRA enrollees.
Blue Shield of California
Email [email protected] to request your Cal-COBRA packet, which will then be sent to your mailing address by Blue Shield of California. Once you receive the packet, fill out the forms and email them to [email protected] AND [email protected]. To follow up, ask questions, or expedite 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 be connected to a representative.
California Choice
CalChoice administers Cal-COBRA through a third party called Conexis WageWorks. After your termination, they should have sent paperwork to your mailing address that will allow you to sign up with Conexis. If you have any questions or haven’t received the paperwork, you can call CalChoice member services at (800) 558-8003.
CoPower
CoPower will send 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 expedite your enrollment.
Covered California
Covered California sends a Cal-COBRA packet to your mailing address 10–14 days after the termination or reduction in hours is processed. Follow the instructions in the packet to submit your enrollment. Contact Covered California with questions at [email protected] or (877) 453-9198.
Delta Dental
The monthly cost of your dental Cal-COBRA coverage will be 110% of your normal premium. 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 expedite your enrollment, you can contact Guardian at 800-541-7846 or [email protected].
Health Net
The monthly cost of your Cal-COBRA coverage will be 110% of your normal premium. 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 at member services (800) 464-4000 to let them know you are interested in coverage and to request your Cal-COBRA packet. Make sure to specify that 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 upon termination. 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 is automatically generated within 5 business days of your termination and sent to your mailing address. Once you’ve received 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 that they have on file. Once you receive it, follow the instructions in the packet to enroll. If VSP says that Gusto 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.