The Consolidated Omnibus Budget Reconciliation Act (COBRA) is the federal law that requires employers, including cities, to offer continuation of health benefits to certain employees and their family members if the employee is terminated or otherwise loses his or her health benefits with the city. In the past, a city was not responsible for paying for that continued health coverage under COBRA, but could do so if it chose to. However, a new law, passed as part of last yearÂ’s federal stimulus package, requires cities to pay 65 percent of the cost of the continued health benefits if an employee is involuntarily terminated for a reason other than misconduct. The city is then reimbursed for the payment through its payroll taxes.

The new requirement has recently been extended to employees who lose their health insurance through February 2010. For more information, go to This topic will also be discussed in the Legal Q&A section of the February issue of Texas Town & City magazine.

Contact Laura Mueller at the TML Legal Department with questions at (512) 231-7400 or

TML member cities may use the material herein for any purpose.
No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the
Texas Municipal League.

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