The 102% Premium Rule
COBRA premiums cannot exceed 102% of the applicable premium — the cost of coverage for similarly situated active employees. The 2% administrative fee is the only additional charge permitted. For self-funded plans, the applicable premium is typically calculated as the plan's actual cost per covered life, often based on the prior year's claims experience.
| Coverage Tier | Employer Pays | Employee Pays | COBRA Premium (102%) |
|---|---|---|---|
| Employee only | $600/month | $200/month | $816/month ($800 × 102%) |
| Employee + spouse | $1,000/month | $400/month | $1,428/month ($1,400 × 102%) |
| Family | $1,200/month | $600/month | $1,836/month ($1,800 × 102%) |
Disability Extension: 150% Premium
Qualified beneficiaries who are determined to be disabled by the Social Security Administration at the time of the qualifying event are entitled to an 11-month extension of COBRA coverage (for a total of 29 months). During the 11-month extension, the premium can be up to 150% of the applicable premium.
Payment Grace Periods
Qualified beneficiaries have 45 days from the date of election to pay the initial COBRA premium (which may cover several months of retroactive coverage). After the initial payment, subsequent premiums are due on the first day of each coverage month, with a 30-day grace period.