Generally speaking I agree with Carl. The most likely treatment is that the cash value of the sick time will be reported on your W-2 as cash wages. It will be subject to social security, medicare, and regular income taxes, whether you get the money directly or it is paid to the insurance company. It will be taxable all at once, since you "constructively received" it all at once (and then directed how it should be spent on your behalf.)
Then, since your COBRA insurance is being paid with after-tax dollars, you can deduct them as medical expenses (subject to the 10% rule and itemized deduction rules).
I can't think of a way that your employer can pay COBRA payments with pre-tax dollars (unlike your regular premium share when you were an employee.)
If you retain the option of canceling the COBRA coverage early and getting the rest back as money in your pocket, then the income might be reported as it is "received" (by the insurance company) or it might still be treated as being received all at once. It's a trickier question.
However, your employer may know a loophole that I don't and they will have the final word.
