Zana Tomich
Dalton & Tomich
Dalton & Tomich
With Affordable Care Act premiums projected to rise in 2026, health coverage decisions are about to get more expensive and complicated. For employers, that means COBRA compliance isn’t just a back office duty anymore; it is a crucial safeguard against unexpected liability and employee fallout. When continuation coverage becomes costlier, former employers scrutinize every missed notice and delay more closely, and regulators may pay more attention, too.
Most employers think of COBRA as one of those background compliance requirements that only matters when someone leaves the company. But when the notice goes out late or the paperwork gets missed, it can quickly become a costly problem.
The Consolidated Omnibus Budget Reconciliation Act, better known as COBRA, has been around since 1986, and yet it continues to challenge well-meaning employers. COBRA remains a federal safety net designed to help employees and their families continue group health insurance after certain life events, particularly when employment ends. But from an employer’s perspective, it’s also a legal minefield of deadlines, notice rules, and liability traps that can quietly turn into five-figure penalties.
—————
What COBRA really requires
If you employ 20 or more employees and offer group health coverage, COBRA applies to you. When an employee loses coverage due to a “qualifying event” like termination, reduction in hours, divorce, or death, both the employer and the plan administrator have clear duties.
Within 30 days of that event, the employer must notify the plan administrator, who then has 14 additional days to send an election notice to the employee or qualified beneficiary. The individual then gets 60 days to decide whether to continue coverage. If an employer misses those deadlines, the Department of Labor can assess civil penalties up to $110 per day per person, plus potential medical costs and attorneys’ fees if the individual sues.
Most employees don’t realize that COBRA is not a subsidy. It’s a right to stay on the employer’s plan by paying the full premium plus up to a 2% administrative fee. For someone used to an employer covering 70% of premiums, that’s a shock. Coverage generally lasts 18 months, but certain situations, like disability, divorce, or death, can extend it to 29 or 36 months.
It is worth noting that Michigan has no separate state continuation law for private-sector employers with fewer than 20 employees, unlike other states that maintain “mini-COBRA” statutes. Employers below that threshold instead rely on the federal Affordable Care Act (ACA) marketplace for continuation options. This absence of a state analogue simplifies the compliance framework but leaves employees of smaller employers without a state-level safety net.
—————
The cost of getting it wrong
From the employer’s side, COBRA failures don’t usually come from bad intent. They come from disorganization: an HR manager leaves, a payroll system changes, or a qualifying event slips through the cracks. But once a missed notice surfaces, it’s too late to fix it quietly. The Department of Labor, IRS, or a plaintiff’s lawyer can impose fines, recovery of medical costs, or even punitive damages.
Beyond penalties, there’s a reputational cost. Employees who leave on good terms but later discover they weren’t properly notified about their benefits often feel betrayed and that frustration can spill into online reviews or wrongful termination claims.
That’s why compliance isn’t just a legal duty: it’s a business-relationship safeguard.
—————
A real-world reminder: Venus Williams’ ‘Comeback for the Insurance’
Recently, tennis legend Venus Williams gave COBRA an unexpected moment in the spotlight. After a 16-month break from professional play, she joked that her comeback was “for the insurance.” Beneath the humor lay a truth every employer should remember: health insurance drives major life decisions.
During her hiatus, Williams relied on COBRA coverage; the same continuation option available to millions of Americans after job loss, reduced hours, or retirement. For her, health coverage wasn’t a perk; it was a necessity tied to her ongoing treatment for autoimmune conditions.
While her platform is unique, the dynamic is universal. For many employees, steady health coverage determines whether they can afford ongoing care, medication, or family stability. For employers, understanding that emotional and financial dependence is key to managing transitions with compassion and compliance.
—————
Practical steps for employers in 2026
1. Audit your COBRA process now.
Confirm that your plan administrator, broker, or internal HR team has clear procedures and deadlines. If the process relies on one person’s memory, it’s not compliant.
2. Coordinate between HR, payroll, and benefits.
A qualifying event in one department (like reduced hours) must trigger notice in another. Systems integration is your friend.
3. Train managers to recognize qualifying events.
COBRA isn’t just about layoffs. A reduction in hours that causes loss of coverage, or an employee’s divorce, can also trigger obligations.
4. Keep meticulous records.
The best defense in a DOL audit or lawsuit is proof that you sent timely notices. Maintain copies for at least three years.
5. Communicate with empathy.
Employees facing life changes are under stress. Clear, timely information about their rights not only protects your company — it reflects your values.
—————
Beyond compliance: The human side of benefits
Venus Williams’ story illustrates what employers sometimes forget: health benefits represent security. When an employee leaves, COBRA isn’t just paperwork; it’s a bridge between employment and the next chapter, between stability and uncertainty.
Employers who treat COBRA as part of their broader duty of care, and not just a compliance checklist, reinforce trust even in difficult transitions. That trust builds reputation, reduces litigation, and strengthens your brand as a responsible employer.
The Bottom Line
COBRA may feel like an old rule in a modern workplace, but its relevance hasn’t faded. In an era of career fluidity, layoffs, and remote work, employees expect employers to manage benefits transitions with accuracy and empathy.
For business leaders, the best COBRA policy is a proactive one: review your procedures, train your teams, and document everything.
Because when it comes to COBRA, the biggest legal headaches aren’t the ones you see coming: they’re the ones hidden in the file you thought someone else was handling.
—————
Zana Tomich is co-founder of Dalton & Tomich, a versatile Detroit-based law firm, where she works with lending institutions and privately held businesses and nonprofits, often in a general counsel capacity.
Most employers think of COBRA as one of those background compliance requirements that only matters when someone leaves the company. But when the notice goes out late or the paperwork gets missed, it can quickly become a costly problem.
The Consolidated Omnibus Budget Reconciliation Act, better known as COBRA, has been around since 1986, and yet it continues to challenge well-meaning employers. COBRA remains a federal safety net designed to help employees and their families continue group health insurance after certain life events, particularly when employment ends. But from an employer’s perspective, it’s also a legal minefield of deadlines, notice rules, and liability traps that can quietly turn into five-figure penalties.
—————
What COBRA really requires
If you employ 20 or more employees and offer group health coverage, COBRA applies to you. When an employee loses coverage due to a “qualifying event” like termination, reduction in hours, divorce, or death, both the employer and the plan administrator have clear duties.
Within 30 days of that event, the employer must notify the plan administrator, who then has 14 additional days to send an election notice to the employee or qualified beneficiary. The individual then gets 60 days to decide whether to continue coverage. If an employer misses those deadlines, the Department of Labor can assess civil penalties up to $110 per day per person, plus potential medical costs and attorneys’ fees if the individual sues.
Most employees don’t realize that COBRA is not a subsidy. It’s a right to stay on the employer’s plan by paying the full premium plus up to a 2% administrative fee. For someone used to an employer covering 70% of premiums, that’s a shock. Coverage generally lasts 18 months, but certain situations, like disability, divorce, or death, can extend it to 29 or 36 months.
It is worth noting that Michigan has no separate state continuation law for private-sector employers with fewer than 20 employees, unlike other states that maintain “mini-COBRA” statutes. Employers below that threshold instead rely on the federal Affordable Care Act (ACA) marketplace for continuation options. This absence of a state analogue simplifies the compliance framework but leaves employees of smaller employers without a state-level safety net.
—————
The cost of getting it wrong
From the employer’s side, COBRA failures don’t usually come from bad intent. They come from disorganization: an HR manager leaves, a payroll system changes, or a qualifying event slips through the cracks. But once a missed notice surfaces, it’s too late to fix it quietly. The Department of Labor, IRS, or a plaintiff’s lawyer can impose fines, recovery of medical costs, or even punitive damages.
Beyond penalties, there’s a reputational cost. Employees who leave on good terms but later discover they weren’t properly notified about their benefits often feel betrayed and that frustration can spill into online reviews or wrongful termination claims.
That’s why compliance isn’t just a legal duty: it’s a business-relationship safeguard.
—————
A real-world reminder: Venus Williams’ ‘Comeback for the Insurance’
Recently, tennis legend Venus Williams gave COBRA an unexpected moment in the spotlight. After a 16-month break from professional play, she joked that her comeback was “for the insurance.” Beneath the humor lay a truth every employer should remember: health insurance drives major life decisions.
During her hiatus, Williams relied on COBRA coverage; the same continuation option available to millions of Americans after job loss, reduced hours, or retirement. For her, health coverage wasn’t a perk; it was a necessity tied to her ongoing treatment for autoimmune conditions.
While her platform is unique, the dynamic is universal. For many employees, steady health coverage determines whether they can afford ongoing care, medication, or family stability. For employers, understanding that emotional and financial dependence is key to managing transitions with compassion and compliance.
—————
Practical steps for employers in 2026
1. Audit your COBRA process now.
Confirm that your plan administrator, broker, or internal HR team has clear procedures and deadlines. If the process relies on one person’s memory, it’s not compliant.
2. Coordinate between HR, payroll, and benefits.
A qualifying event in one department (like reduced hours) must trigger notice in another. Systems integration is your friend.
3. Train managers to recognize qualifying events.
COBRA isn’t just about layoffs. A reduction in hours that causes loss of coverage, or an employee’s divorce, can also trigger obligations.
4. Keep meticulous records.
The best defense in a DOL audit or lawsuit is proof that you sent timely notices. Maintain copies for at least three years.
5. Communicate with empathy.
Employees facing life changes are under stress. Clear, timely information about their rights not only protects your company — it reflects your values.
—————
Beyond compliance: The human side of benefits
Venus Williams’ story illustrates what employers sometimes forget: health benefits represent security. When an employee leaves, COBRA isn’t just paperwork; it’s a bridge between employment and the next chapter, between stability and uncertainty.
Employers who treat COBRA as part of their broader duty of care, and not just a compliance checklist, reinforce trust even in difficult transitions. That trust builds reputation, reduces litigation, and strengthens your brand as a responsible employer.
The Bottom Line
COBRA may feel like an old rule in a modern workplace, but its relevance hasn’t faded. In an era of career fluidity, layoffs, and remote work, employees expect employers to manage benefits transitions with accuracy and empathy.
For business leaders, the best COBRA policy is a proactive one: review your procedures, train your teams, and document everything.
Because when it comes to COBRA, the biggest legal headaches aren’t the ones you see coming: they’re the ones hidden in the file you thought someone else was handling.
—————
Zana Tomich is co-founder of Dalton & Tomich, a versatile Detroit-based law firm, where she works with lending institutions and privately held businesses and nonprofits, often in a general counsel capacity.
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