Who Pays for COBRA Coverage?

The employee generally pays the full cost of the insurance premiums. In fact, the law allows the employer to charge 102 percent of the premium, and to keep the 2 percent to cover your administrative costs. When an employee gets extended COBRA coverage due to disability, you can charge 150 percent of the premium for months 18 through 29.

Timing of payments. Federal law states that COBRA coverage can be terminated if premium payments are late. According to the law, payment of any premium is considered to be timely if it is made within 30 days after the due date or within a longer period set out under the plan. The due date must not begin before the first day of the coverage period. And, when someone chooses to take COBRA coverage, they still have 45 days to make the first payment.

The fact that most insurers want you to pay in advance for coverage complicates this process because you have to pay in advance for the coverage under the policy, but the law states that you have to give COBRA insureds a 30-day grace period from the time the payment is due. This is yet another reason to consider outsourcing your administration.

Elena leaves her job and her group health plan coverage on August 1. She elects COBRA coverage on September 1 and chooses to pay her COBRA premiums on a monthly basis. Elena's first premium payment is due on October 16. On that date she must make payments for August and September. Payment for October must be made by October 31. Thereafter, Elena must make a payment no later than 30 days after the first day of each month.