Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. COBRA coverage may be less expensive, though, than individual health coverage.

Premiums for COBRA continuation coverage cannot exceed 102 percent of the cost to the plan for similarly situated individuals who have not experienced a COBRA qualifying event. The cost to the plan is both the portion paid by employees and any portion paid by the employer before the qualifying event. The COBRA premium can equal 100 percent of that combined amount plus a 2 percent administrative fee.

For example, if the cost of providing health benefits coverage for a similarly situated employee who has not experienced a COBRA qualifying event is $400 per month, $100 of which is paid by the employee and $300 of which is paid by the employer, the plan may charge an individual a COBRA premium of up to $408 per month (102 percent times $400). The employer is not responsible for any portion of the individual's COBRA premium, but may, if it wishes, pay a portion, or all, of the qualified beneficiary's premium.

For qualified beneficiaries receiving the 11-month disability-based extension of coverage (click on "Extended Periods of Coverage" on the left navigation bar for more information about the 11-month extension), the premium for those additional months may be increased from 102 percent to 150 percent of the plan's total cost of coverage as long as the disabled qualified beneficiary participates in the additional coverage. Non-disabled qualified beneficiaries may participate in the additional coverage even if the disabled qualified beneficiary does not. In that event, the plan cannot charge the non-disabled qualified beneficiaries that participate in the 11-month extension more than the 102 percent rate for the entire period of coverage, including the 19th through the 29th month of coverage.

COBRA premiums may be increased if the costs to the plan increase for similarly situated non-COBRA beneficiaries, but, for COBRA purposes, such premiums generally must be fixed in advance of each 12-month premium cycle. The plan must allow you to pay premiums on a monthly basis, if you wish, but may give you the option to make payments at other intervals (for example, weekly or quarterly).

You (or someone on your behalf) must make the initial premium payment within 45 days after the date of your COBRA election; the payment generally must cover the period from the coverage loss date through the month in which the initial payment is made. However, if you only need COBRA coverage for a short period of time, such as one or two months, you can pay only for those months from the coverage loss date.

After you make the initial premium payment, subsequent premiums (usually paid on a monthly basis) are considered to be timely if made by the date due or within a grace period of 30 days after the date due (or longer period as applies to or under the plan). Payment is considered to be made on the date it is sent to the plan.

If you do not make premium payments by the first day of the period of coverage, the plan has the option to cancel coverage until payment is received and then reinstate the coverage retroactively to the beginning of the period of coverage if payment is made within the grace period. Alternatively, the plan can hold any claims received during the grace period and then process them if the premium payment is made within the grace period, or deny them and terminate coverage effective the first day of the period of coverage for which payment is not made within the grace period.

If the amount of the payment you make to the plan is in error but is not significantly less than the amount due, the plan may accept the payment as satisfying the plan's requirement for the amount that must be paid. Alternatively, the plan is required to notify you of the deficiency and grant a reasonable period (for this purpose, 30 days is considered reasonable) to pay the difference. The plan is not obligated to send monthly premium notices or payment coupons.

COBRA beneficiaries remain subject to the rules of the plan and therefore must satisfy all costs related to co-payments and deductibles.

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Page Last Modified: 09/25/2008 8:35:28 AM
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