368 / Who must pay the cost of COBRA continuation coverage and how is the cost calculated?

A plan may require a qualified beneficiary to pay a premium for continuation coverage. The premium generally cannot exceed a percentage of the applicable premium.

The applicable premium is the plan’s cost for similarly situated beneficiaries ( Q 367) with respect to whom a qualifying event has not occurred. The applicable premium for each determination period must be fixed by the plan before the determination period begins. A determination period is defined as any 12 month period selected by the plan, provided that it is applied consistently from one year to the next. Because the determination period is a single period for any benefit package, each qualified beneficiary will not have a separate determination period.¹

Except as provided under ARRA 2009 ( Q 356), the percentage of the applicable premium that may be charged is generally 102 percent. In the case of a disabled qualified beneficiary, the premium may be as much as 150 percent of the applicable premium for any month after the 18 month of continuation coverage. A plan may require payment equal to 150 percent of the applicable premium if a disabled qualified beneficiary experiences a second qualifying event during the disability extension period, after the 18 month. The 150 percent amount may be charged until the end of the 36 month maximum period of coverage, that is, from the beginning of the 19 month through the end of the 36th month. A plan that does so will not fail to comply with the nondiscrimination requirements of IRC Section 9802(b).²