COBRA Premiums and Payment

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A plan may charge the qualified beneficiary for the cost of COBRA continuation coverage, but it is not required to do so.204

The maximum COBRA premium for one month of continuation coverage is 102% of the applicable premium.205 The additional 2% represents an administrative fee that the Plan Administrator may charge. Under the 11-month disability extension, the plan may charge the disabled qualified beneficiary up to 150% of the applicable premium during the extension.206 The federal government had also provided COBRA premium assistance for certain employees (and their families) who were involuntarily terminated between September 1, 2008 and May 31, 2010.36 Under the premium subsidy, the employee paid 35% of the COBRA premium and the employer paid the remaining 65% of the COBRA premium, and was later reimbursed by the federal government for the other 65% through a credit or refund of payroll taxes. The premium subsidy was available for up to 15 months of the employee’s maximum COBRA coverage period.207 Employers should consult with legal counsel for further advice on the COBRA premium subsidy.

The COBRA premium may be different depending upon the type of coverage the qualified beneficiary elects. A plan may require that the qualified beneficiary pay the initial premium for COBRA continuation coverage as early as 45 days from the date of his or her COBRA election.208 Thereafter, premiums are generally due on the first day of the month, subject to a 30-day (or longer) grace period.209

Plans are not required to send out monthly bills, although some do. A plan may terminate a qualified beneficiary’s COBRA coverage for his or her nonpayment of premiums after the expiration of any applicable grace periods. In that case, the Plan Administrator must send the qualified beneficiary the Notice of Termination of Coverage before such coverage is terminated prior to the expiration of the maximum coverage period.

CREDITS: This is an excerpt from An Employer’s Guide to Employment Issues in Minnesota, provided by the Minnesota Department of Employment and Economic Development & Linquist & Vennum P.L.L.P., Tenth Edition, 2009. Copies are available without charge from the Minnesota Department of Employment and Economic Development, Small Business Assistance Office.

This post is also part of a series of posts covering the Continuation of Group Health and Life Insurance Coverage Law (COBRA). This information is not legal advice. You should consult with an experienced employment attorney before dealing with COBRA-related employment issues.

204 Treas. Reg. § 54.4980B-8, Q/A-1(a).
205 29 U.S.C. § 1162(3)(A).
206 29 U.S.C. § 1162(3).
207 Department of Defense Appropriations Act for Fiscal Year 2010, Pub L. No. 111-118 § 1010(b) (2009). 208 29 U.S.C. § 1162(3); Treas. Reg. §54.4980B-8, Q/A-5(b).
209 29 U.S.C. § 1162(2)(C); Treas. Reg. §54.4980B-8, Q/A-5(a).