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 plan dies at closing, the duty to offer continuation to their former employees can land on the buyer's plan. Find out before closing whose plan covers whom on day one, because the answer decides both a real cost and the first letter your new employees receive.

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