What does COBRA require from a Texas employer?

If you employed 20 or more people on more than half of typical business days last year, the Consolidated Omnibus Budget Reconciliation Act (COBRA) requires you to offer continued group health coverage after qualifying events, at the former participant’s expense. Smaller Texas employers are not off the hook: state continuation rules apply to state-regulated insured plans. The compliance risk lives almost entirely in notices and timing.

4J Insurance Brokerage is an independent employee benefits and commercial insurance brokerage in Frisco, Texas, serving North Texas employers with approximately 50 to 500 employees. Here is the employer-side view.

Who is subject to federal COBRA

Private-sector employers that had 20 or more employees on more than 50 percent of typical business days in the prior calendar year, counting part-time employees as fractions. At 50 to 500 employees, assume COBRA applies to you. The 20-employee threshold is also the source of the durable myth that ERISA has a small-employer exemption; it does not, as our ERISA employer guide explains.

Qualifying events and how long coverage runs

18 months for the classic events: termination of employment (other than gross misconduct) and reduction of hours. A disability extension can lengthen this period when Social Security disability criteria are met.
36 months for events affecting spouses and dependents: divorce or legal separation, the employee’s death, the employee becoming entitled to Medicare, or a child aging out of dependent eligibility.

The person electing pays, generally up to 102 percent of the full plan cost. COBRA participants are part of your risk pool while covered, which is why terminated-but-continuing members show up in renewal data.

What the employer must actually do

Initial notice. Covered employees and spouses receive a general COBRA rights notice when coverage begins. It is boilerplate, and it is the boilerplate people sue over when it is missing.
Report events on time. The employer notifies the plan administrator of employer-side qualifying events promptly; the participant carries the duty to report divorce and dependent aging-out, a distinction employees do not know unless told.
Election notice. The administrator sends the election notice, and the qualified beneficiary then has at least 60 days to elect.
Run the clock correctly. Coverage terminates when the period ends, premiums go unpaid past grace, or the person gains other group coverage. Ending it early and wrongly is the expensive direction.

Texas state continuation, the small-group counterpart

Employers below the federal threshold with Texas-regulated insured plans face state continuation instead: employees losing coverage can generally continue it for a period, commonly up to nine months, and state continuation can also add a shorter tail after federal COBRA is exhausted. Self-funded ERISA plans are outside state insurance mandates, one of the quieter differences between funding structures covered on our health plan funding hub.

Where employers actually get hurt

The event nobody reported. A termination processed in payroll but never sent to the COBRA vendor. The vendor cannot send a notice for an event it never received.
Mergers and carrier changes. COBRA participants must move with the plan; they are the population most often dropped in transitions.
Doing it by hand. A third-party administrator costs little relative to notice-failure exposure. Outsource the mechanics, keep a calendar discipline for feeding the vendor events, and remember the legal duty stays with the plan.

COBRA employer FAQ

Does COBRA apply to employers with fewer than 20 employees?

Federal COBRA generally does not, but Texas state continuation rules can apply to smaller employers with state-regulated insured plans. Smaller does not mean exempt from continuation obligations; it means a different rulebook.

How much can we charge someone on COBRA?

Generally up to 102 percent of the full plan cost, meaning the entire premium including the share the employer was paying, plus a 2 percent administration charge.

Who actually administers COBRA, us or a vendor?

Most employers outsource COBRA administration to a third-party administrator, and it is usually money well spent. Outsourcing the mechanics does not outsource the legal responsibility, so the employer still needs to feed the vendor events on time.

Have Us Check Your Continuation Setup

This page is educational and does not constitute legal, tax or benefits advice. Employer-specific questions may require review by benefits, tax, legal, payroll or compliance professionals. 4J Insurance Brokerage is a broker and does not underwrite risk or issue policies.