COBRA Eligibility: 7 Mistakes for HR To Avoid

Eligibility for continuation of health coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) may seem straightforward. But in practice, it’s one of the most common sources of compliance errors.

Many HR professionals associate COBRA with employee terminations. But the story doesn’t end there. COBRA applies to a broader set of circumstances, and overlooking those situations can create significant risk.

Eligibility decisions often determine whether individuals receive COBRA notices and continuation coverage. If those decisions are incorrect, your organization could face coverage disputes, compliance penalties, litigation risks and increased regulatory scrutiny.

Understanding common eligibility mistakes can help you reduce risk and improve COBRA compliance. Let’s look at seven mistakes HR teams most often make.

Mistake No. 1: Assuming COBRA only applies to terminations

Terminations are the most visible trigger for COBRA coverage, but they are not the only one. The following are examples of other qualifying events that can initiate COBRA obligations:

Reduction in hours
Divorce or legal separation
Death of a covered employee
Loss of dependent status
Employee becoming entitled to Medicare

Why this matters: Failing to recognize qualifying events can result in COBRA not being offered when it should have been. In addition to compliance violations, this can lead to disputes with employees or dependents who should have been entitled to continuation coverage.

Mistake No. 2: Overlooking dependent eligibility

COBRA rights extend beyond employees. Spouses and dependents may have independent COBRA rights when:

A divorce occurs
A child ages out of coverage
An employee dies
An employee becomes entitled to Medicare

Why this matters: Spouses and dependents may have independent COBRA rights even when the employee’s situation appears straightforward. Overlooking dependent eligibility can lead to notice failures, coverage disputes and compliance penalties.

Mistake No. 3: Misunderstanding what counts as a loss of coverage

COBRA is triggered only when a qualifying event results in a loss of coverage. Situations that do not typically trigger COBRA include:

Plan design changes
Premium increases or cost-sharing changes
Switching employees to a different health plan without loss of eligibility

Why this matters: Eligibility depends not only on the qualifying event but also on whether a loss of coverage occurred. Failing to offer COBRA when required is a serious compliance issue. But misunderstanding this distinction and offering COBRA when it’s not required can result in unnecessary administrative costs or setting an unintended precedent.

Mistake No. 4: Misclassifying gross misconduct

Voluntary and involuntary termination can trigger continuation coverage. But employees terminated for gross misconduct are not eligible for COBRA.

While the rule appears straightforward, applying it in practice can be challenging. Remember this when considering denying COBRA coverage due to gross misconduct:

The term “gross misconduct” is not clearly defined under federal law. It generally requires intentional, deliberate or reckless disregard for employer interests.
It is interpreted narrowly.
It can be challenged.

Why this matters: Poor performance or frequent absences rarely qualify as gross misconduct under COBRA. Because gross misconduct is narrowly interpreted and often challenged, incorrectly denying COBRA coverage can expose employers to disputes, legal expenses and compliance risks. Decisions involving gross misconduct should be carefully documented and reviewed with legal counsel.

Mistake No. 5: Missing eligibility during leaves of absence

Leaves of absence can make coverage status unclear. It often depends on the type of leave and your plan terms. But the main factor is whether an employee loses health coverage during their leave. COBRA may apply when:

Personal, educational or unpaid leave results in a loss of coverage
Coverage ends because an employee does not return to work following leave

Why this matters: COBRA eligibility is tied to a loss of coverage, not to employment status alone. Failing to evaluate leave situations properly may result in missed notices and violations of continuation coverage.

Mistake No. 6: Failing to verify coverage status at the time of the event

COBRA applies only to individuals who are enrolled in your health plan. COBRA does not apply when:

An employee declined coverage.
A dependent was not enrolled in the plan.
Coverage never took effect.

Why this matters: COBRA rights generally apply only to individuals who were covered under the health plan at the time the qualifying event occurred. Verifying enrollment status helps prevent incorrect eligibility determinations and reduces administrative errors.

Mistake No. 7: Treating eligibility decisions as one size fits all

Not every eligibility determination follows the same path. Even when situations appear similar, small differences in facts can change whether COBRA applies and what obligations follow.

Factors include:

The type of qualifying event
The individual involved
Whether coverage was lost
Timing and notification requirements

Why this matters: Each situation should be evaluated based on its specific facts. Seemingly minor differences can significantly affect COBRA eligibility obligations. Applying the same approach to every situation increases the risk of incorrect decisions, missed notices and inconsistent plan administration.

How to improve eligibility accuracy

The good news is that many COBRA eligibility errors are preventable. Establishing clear processes and providing ongoing training can help your organization make consistent eligibility determinations and reduce compliance risk.

Because COBRA eligibility depends on specific facts and circumstances, consistency is essential. The following practices can help improve accuracy and support compliant administration:

Train HR teams on qualifying events beyond termination.
Use checklists for offboarding and life events.
Document eligibility decisions.
Coordinate closely with COBRA administrators.
Review edge cases with legal or benefits advisers.

Greater understanding enhances COBRA compliance

COBRA eligibility is not just about knowing the rules. It’s about applying them consistently in real-world scenarios.

COBRA eligibility can become especially complex when situations involve Medicare, dependent coverage, leaves of absence, disability extensions or questions about qualifying events. When uncertainty exists, it is often better to evaluate the facts carefully than to make assumptions about eligibility.

By understanding the mistakes HR teams most often make, your organization can improve compliance, reduce disputes and better support employees during periods of transition.

If you have questions about COBRA eligibility or administration, contact us. We can help review eligibility scenarios, clarify notice obligations and ensure your COBRA processes align with current requirements.