What Employers Can Charge for COBRA: The 102 Percent Rule
An employer may charge up to 102 percent of the applicable premium, and up to 150 percent for the disability months.
The cost rules decide what a plan can bill, how often and when. This guide sets them out from the statute and the premium regulation, with a worked example.
The Cap and the Disability Cap
Two percentages cover almost every case.
102 percent. The premium may not exceed 102 percent of the applicable premium under 26 U.S.C. 4980B(f)(2)(C).
150 percent. For any month after the 18th in which a disability-extended beneficiary is covered, the cap rises to 150 percent.
Who sets the rate. The applicable premium is computed and fixed before the determination period begins, and the period is 12 months applied consistently, under 26 CFR 54.4980B-8.
When Payments Are Due
The beneficiary gets time at the start and a grace period each month.
The first payment. No premium may be required before 45 days after the initial election.
Monthly installments. Payment must be allowed in monthly installments, and the plan may offer other intervals.
The grace period. A payment is timely if made within 30 days after the due date under the statute. The regulation words this as 30 days after the first day of the coverage period, so apply the wording in your plan documents and ask the administrator.
What Happens When a Payment Is Late
A late premium can end coverage.
Termination. Failing to pay a premium on time is one of the situations that can end continuation coverage early.
A payment counts when sent. Under 26 CFR 54.4980B-8, a payment counts as made on the date it is sent.
Notify. When coverage ends early, the administrator must send a notice of early termination as soon as practicable.
A Premium Calculation
The cap works out to a specific dollar figure.
The facts. The applicable premium for an employee’s coverage is $800 a month.
The result. The plan may charge up to $816 a month, which is 102 percent. For a disability-extended beneficiary after the 18th month it may charge up to $1,200, which is 150 percent.
The takeaway. Set the rate once for the 12-month period and document how you computed it.
Related Rules and Sources
Where to read the rule in full.
How Much COBRA Costs
More worked examples.
How Long It Lasts
The months the premium applies to.
The Notices
The notices that go with a premium change.
26 U.S.C. 4980B, COBRA continuation coverage · 26 CFR 54.4980B-8, premium determination
We run COBRA so nothing is missed.
We set up who administers COBRA, keep the notices on schedule and check the paperwork before it goes out.
Related pages.
State Continuation and Mini-COBRA
State laws for smaller employers.
Who Is Covered
Which people COBRA protects.
How Long It Lasts
18, 29 and 36 months explained.
The Notices
The five COBRA notices.
The 20-Employee Threshold
Counting to 20.
COBRA Continuation Coverage Law
The federal rules in full.
Questions that come up.
Short answers to the questions we hear most. Each links to the full page.
What can an employer charge for COBRA?
Up to 102 percent of the applicable premium, and up to 150 percent for disability-extended months after the 18th.
How long does a person have to pay the first COBRA premium?
No premium can be required before 45 days after the initial election.
Can COBRA be paid monthly?
Yes. Plans must allow monthly installments and may offer other intervals.
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