When an employee leaves your company, COBRA compliance is typically treated as a checkbox item—send the election notice, process the paperwork, move on. After all, if they elect coverage, they're paying their own premiums. It's not your problem anymore, right?

Not quite. For self-insured employers, COBRA participants' claims come directly out of your pocket—dollar for dollar, in real time. And because of who tends to elect COBRA, those dollars add up fast. Understanding this dynamic is the first step toward managing a cost lever that's hiding in plain sight.

Who Elects COBRA—and Why It Matters

COBRA election rates hover around 20-30% on average, but that number masks something important: the employees who elect COBRA aren't a random cross-section of your workforce. They're disproportionately people with known or anticipated healthcare needs.

This is adverse selection in action. An employee who's young, healthy, and leaving for a new job with benefits has little reason to pay COBRA premiums—they'll get coverage elsewhere, often at a lower cost. But an employee managing a chronic condition, facing an upcoming surgery, or supporting a family member with significant medical needs? COBRA's guaranteed coverage becomes a lifeline.

The result: COBRA participants generate healthcare claims far higher than your average active employee. Industry estimates suggest these costs can run two to three times higher than the mean—and in some cases, much more.

The Direct Cost to Self-Insured Employers

As a self-insured employer, you're not paying premiums to a carrier who absorbs claims risk. You're paying claims directly. Every prescription filled, every specialist visit, every hospital stay for everyone on your plan—including COBRA participants—comes out of your funds.

The COBRA premium that departing employees pay? It's based on the average cost of coverage across your plan. But COBRA participants aren't average. 

When someone with $150,000 in annual claims is paying a premium based on a $15,000 per-member average, you're absorbing the difference. That's not a rounding error—it's a significant, direct cost that hits your bottom line in real time.

Unlike fully-insured arrangements where high claims might show up as a renewal increase next year, self-insured employers feel this impact immediately. Every month a high-cost COBRA participant remains on your plan, you're funding the gap between what they're paying and what they're costing.

The Stop-Loss Complication

Most self-insured employers carry stop-loss insurance to protect against catastrophic claims. But COBRA participants can create exposure here, too.

On the specific stop-loss side, a COBRA participant with a serious medical situation can blow through your individual attachment point, triggering reimbursement claims and potentially affecting your stop-loss renewal rates. On the aggregate side, a concentration of high-cost COBRA claimants contributes to your total claims volume, which can push you toward your aggregate corridor.

And here's the longer-term problem: stop-loss carriers look at your claims history when pricing renewals. A pattern of high-cost COBRA claims doesn't just cost you money this year—it can drive up your stop-loss premiums for years to come, even after those COBRA participants have long since moved on.

Why This Stays Hidden

If this dynamic is so significant, why don't more employers know about it?

A few reasons…

First, claims data often isn't segmented in ways that make COBRA costs visible. COBRA-specific claims reporting isn't a standard ask in most employer-TPA relationships—it's simply not on most benefits teams' radar to request. Without that specific lens, the costs are real but buried in the overall numbers, making it hard to see how much departing employees are actually costing you.

Second, finance and benefits teams don't always connect the dots. The person managing COBRA administration may not be the same person reviewing claims reports or negotiating stop-loss renewals. The cost sits in a gap between functions.

Third, there's a timing issue. COBRA coverage can extend up to 18 months (or longer in certain circumstances). A departing employee's claims might span multiple plan years, making it difficult to attribute costs back to specific departure decisions. By the time you see the impact, the connection isn't obvious.

What Employers Can Do

Understanding this dynamic opens up a few practical paths forward:

1. Get visibility into your data. Ask your TPA to provide COBRA-specific claims reporting. You need to see what COBRA participants are actually costing you—not just how many people elected coverage, but what their claims look like relative to your active population. This is your money; you should know where it's going.

2. Understand your stop-loss exposure. Review how COBRA claims are affecting your specific and aggregate stop-loss positions. Talk to your broker about whether your current attachment points make sense given your COBRA claims patterns.

3. Think differently about the departure moment. The point when an employee leaves is also the point of maximum opportunity to influence their coverage decision. Employees who elect COBRA often do so because they don't know what alternatives exist—or the process of finding them feels overwhelming during an already stressful transition.

This is where employers have more agency than they might think. Helping departing employees navigate their options—marketplace coverage, spouse's plans, Medicaid, short-term solutions—isn't just a kindness. It's a way to reduce adverse selection into your COBRA pool without restricting anyone's access to coverage.

How When Helps

This is exactly the problem When was built to solve. When partners with employers to provide departing employees with personalized guidance through an AI-powered assistant named Jamie, who helps them navigate their health insurance options during the transition.

Here's how it works: 

When an employee is offboarded, they're connected with Jamie, who walks them through the full landscape of coverage options—marketplace plans, Medicaid eligibility, spouse or parent coverage, short-term plans, and yes, COBRA if it's genuinely the right fit. Jamie considers their specific situation: their health needs, their budget, their location, their timeline. 

The goal isn't to steer anyone away from COBRA arbitrarily—it's to make sure they understand all their options so they can make an informed decision that actually works best for them.

As a Healthcare.gov-approved partner, When can help employees enroll directly in marketplace coverage, often at a lower cost than COBRA with comparable or better benefits. For many departing employees, this is the first time anyone has explained that these alternatives exist, let alone helped them through the process.

The result for self-insured employers: fewer employees defaulting into COBRA simply because it's the path of least resistance. That means less adverse selection in your COBRA pool, lower direct claims costs, reduced stop-loss exposure, and more predictable plan performance.

But the benefits extend beyond the balance sheet. How you treat employees on their way out says as much about your organization as how you treat them on the way in. Departing employees talk—to former colleagues, on Glassdoor, to their professional networks. An offboarding experience that leaves someone feeling abandoned to figure out health insurance on their own during an already stressful transition creates a very different impression than one where they receive genuine, personalized support.

By helping employees navigate their options, you're reinforcing your employer brand at a moment that disproportionately shapes how people remember their time with you. That matters for your reputation in the market, for referrals, and for the boomerang employees who might return down the road. 

You're not taking anything away from employees—you're giving them better support during a vulnerable moment, protecting your organization from costs you didn't know you were absorbing, and demonstrating that your commitment to your people doesn't end on their last day.

A Cost Lever Worth Managing

COBRA isn't just a compliance obligation. It's a cost lever that most self-insured employers aren't actively managing because they simply don't see the connection between departing employees' coverage decisions and the claims dollars flowing out of their plan.

The employers who understand this dynamic can take meaningful action—not by limiting access to coverage, but by ensuring departing employees have the information and support to make genuinely informed decisions. That's better for employees navigating a transition, and better for the organizations funding the downstream costs.

The first step is simply recognizing that when someone elects COBRA, the story doesn't end there. Their claims are your claims. And as a self-insured employer, you're paying every dollar.

Ready to take control of your COBRA costs? Contact our team to learn how we help self-insured employers reduce healthcare spending while giving departing employees the support they deserve.