COBRA Continuation Premium Calculator

How much does the COBRA premium usually cost?

The cost of a COBRA premium is typically 102% of the total cost of your health insurance plan. Because you are now responsible for paying both your previous employee contribution and the portion your employer used to pay, the premium is usually significantly higher than what you paid while employed.

• Employee's previous share: Usually around 15-30% of the total cost.
• Employer's previous share: Usually around 70-85% of the total cost.
• Administrative fee: Up to 2%.

Who is responsible for paying the premium?

Under COBRA regulations, the qualified beneficiary is solely responsible for paying the monthly premium out-of-pocket. A qualified beneficiary can include:

• The former employee
• A spouse or ex-spouse
• Dependent children

While the employer facilitates the continuation of the group health plan, they are not legally obligated to pay any portion of your premium once your employment or qualifying event has occurred.

Is there an additional administrative fee included?

Yes, an administrative fee is typically included in your COBRA premium. Federal law allows the plan administrator to charge a fee to cover the accounting and paperwork costs of managing the continuation coverage.

When are my monthly premium payments due?

Your payment due dates depend on whether it is your initial payment or a standard ongoing monthly premium:

1. Initial Premium: You have 45 days from the date you officially elect COBRA coverage to make your first premium payment. This payment must cover the retroactive period from the date your employee coverage ended.
2. Subsequent Monthly Premiums: After the initial payment, premiums are typically due on the first day of each month, as stipulated by your specific plan documents.

Is there a grace period for late payments?

Yes, federal law provides a mandatory grace period for standard COBRA premium payments to protect you from immediate cancellation.

• Initial Payment: There is no additional grace period beyond the standard 45 days after your election date.
• Ongoing Monthly Payments: You are granted a minimum 30-day grace period starting from the due date (e.g., if due on May 1st, you have until May 30th or 31st to pay).

If you pay within the grace period, your coverage is reinstated retroactively. However, your provider may temporarily suspend services until the payment clears.

What happens if I completely miss a premium payment?

If you completely miss a premium payment and fail to pay before the 30-day grace period expires, the consequences are severe and irreversible:

1. Permanent Cancellation: Your COBRA coverage will be permanently terminated retroactive to the last day of the month for which you fully paid.
2. Loss of Reinstatement Rights: You cannot be reinstated into the health plan once coverage is legally canceled for non-payment.
3. Medical Liability: You will be solely responsible for 100% of any medical bills incurred after your coverage termination date.

Can the premium amount change while I am on COBRA?

Yes, your COBRA premium amount can fluctuate. Because your coverage is directly tied to your former employer's group health plan, any changes to the overall cost of that plan will affect your premium.

• Annual Renewals: If the insurance company raises the rates for the employer's group plan during the annual open enrollment period, your 102% premium will increase accordingly.
• Plan Changes: If the employer changes health insurance carriers or modifies the plan benefits, your costs will reflect those changes.

The plan administrator is legally required to notify you of any rate changes before they take effect.

How and where do I submit my premium payments?

You must submit your premium payments directly to your COBRA plan administrator. The exact method and location depend on how your former employer manages their benefits.

Typically, payments are sent to:

• A Third-Party Administrator (TPA), such as WageWorks, PayFlex, or WEX.
• The Human Resources or Benefits department of your former employer.

Payment Methods: Most administrators accept checks sent via mail, but many now offer online portals where you can pay via ACH bank transfer or credit card. Always refer to your official COBRA election notice for specific payment instructions.

Are COBRA continuation premiums tax deductible?

Yes, COBRA premiums can be tax-deductible, but only under specific circumstances as qualifying medical expenses. To claim them:

1. You must itemize your deductions on Schedule A of your IRS Form 1040.
2. Your total unreimbursed medical expenses (including COBRA premiums, doctor visits, and prescriptions) must exceed 7.5% of your Adjusted Gross Income (AGI).

If you are self-employed, you might be eligible to deduct COBRA premiums as a self-employed health insurance deduction without having to itemize. It is always recommended to consult a licensed tax professional.

Can my former employer choose to subsidize the cost?

Yes, your former employer can voluntarily choose to subsidize part or all of your COBRA premium. This is most commonly seen in the following scenarios:

• Severance Agreements: As part of a layoff or executive termination package, an employer might agree to pay the premium for a set period (e.g., 3 to 6 months).
• Furloughs: During temporary layoffs, employers may subsidize COBRA to help retain employees until they are recalled.

Once the employer's subsidy period ends, you will be responsible for paying the full 102% premium if you wish to maintain your coverage for the remainder of your eligibility.

Source Data

• Department of Labor: COBRA Consumer FAQs
• HealthCare.gov: COBRA Coverage Options
• IRS Publication 502: Medical and Dental Expenses

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