COBRA

Definition

The right to stay on an employer health plan after leaving, at full cost.

Why It Matters

Buying the company does not quietly carry the seller's health plan across, and the continuation right follows whoever ends up maintaining a plan. In an asset sale where the seller's group drops every health plan at closing, a buyer that carries on the business without interruption becomes its successor, and the duty to offer continuation to the former employees lands on the buyer's plan. Federal COBRA reaches only employers that normally had 20 or more employees in the prior year, so on a smaller target ask whether a state continuation law applies instead.

In numbers: Continuation premiums run the full cost plus a 2% administration charge, so an employee paying $180 a month of a $700 premium through payroll can see a $714 bill for the same plan.