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Are the employees of small businesses eligible to enroll in COBRA?

The federal COBRA law does not apply to the employees of small businesses but a growing number of states, including California, New York and Texas, have proposed expanding their own "mini-COBRA" laws that make the same coverage available to former employees of small businesses.

States facing severe budget shortages are making this mini-COBRA insurance to more people to prevent these unemployed workers from enrolling in other health plans at the state's expense. Typically anyone eligible for COBRA (either federal or state) is ineligible for any state-subsidized or welfare-type health plan even if the COBRA coverage was not elected.

The risk is that some laid off workers may waive the more expensive COBRA coverage in expectation of qualifying for free coverage for low income people. They can be surprised to learn that Medicaid and similar health plans are unavailable until after the 18 months that COBRA would have been available have passed. In this case, the only option is a commercial COBRA alternative insurance.

revised 3/31/09

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COBRA continuation coverage may provide temporary protection when changing jobs, going through a divorce or negotiating other life transitions. Choosing the right health insurance is crucial to protect your health and financial security.