How COBRA Premiums Are Calculated

Why does a health plan that cost you $200 a month suddenly cost $816? The answer is one short federal rule. Under COBRA, your old plan can charge you up to 102 percent of its full cost, not just the slice you used to pay. This guide walks through that math, the time limits, and the payment deadlines, so the first bill holds no surprises.

What Does 102 Percent of the Plan Cost Actually Mean?

It means your monthly COBRA premium equals the plan’s full monthly cost times 1.02. The full cost is the employer’s share plus your share. The extra 2 percent covers the plan’s paperwork.

The Department of Labor puts the limit plainly: the premium cannot exceed 102 percent of the plan’s total cost of your coverage. That 102 percent is a ceiling, not a fixed price. A plan can charge less, and our calculator lets you pick a 0, 1, or 2 percent fee.

The formula has only two steps. First, add the employer share and the employee share to get the plan cost. Second, multiply by 1.02. For a plan costing $600 a month in total, the COBRA premium is $600 x 1.02, or $612.

The fee part is small in dollars. On an $800 plan, 2 percent adds just $16 a month. Over 18 months, that fee totals $288. The big jump comes from the employer share, which is covered next.

Why Does the Bill Jump So Much Compared With Your Old Paycheck Deduction?

The bill jumps because your employer stops paying its share, and you take over that share. The DOL guide says that once you elect COBRA, you are responsible for the full cost of coverage.

Take the worked example on our calculator page. The employer paid $600 a month and the worker paid $200. The plan cost is $800, and the COBRA premium at 102 percent is $816 a month.

That is 4.08 times the old deduction, or $616 more each month. Nothing about the plan itself changed. You keep the same group coverage you had while working; only the payer changed.

Your pay stub usually shows only your share. To find the employer share, check your benefits portal, your annual benefits statement, or your election notice. The election notice from the plan lists the actual COBRA premium, and that figure always wins over an estimate.

You can run your own numbers in the COBRA premium calculator with a month-by-month schedule. It asks for both shares, the fee rate, and how many months you expect to keep coverage.

How Long Can You Stay on COBRA, and When Does the Price Change?

Coverage lasts 18 months after a job loss or cut in hours, and 36 months after events like divorce or a death. A disability extension can stretch 18 months to 29.

The DOL guide lists these maximum periods by qualifying event:

The disability extension applies when Social Security finds a qualified beneficiary disabled within the first 60 days of COBRA. During those 11 extra months, the plan can charge up to 150 percent. Federal rules say that higher rate covers months 19 through 29, and only when the disabled person is in the covered group.

On the $800 plan, 150 percent is $1,200 a month. That is $384 more than the regular $816 rate.

What Does a Full Stretch of Coverage Add Up To?

Multiply the monthly premium by the number of months you keep it. On the $800 plan, 18 months at $816 comes to $14,688. That total is the number to plan a budget around.

The 29-month total works out to about 1.20 times the plain plan cost. Our calculator shows this as the effective multiplier. It blends 18 months at 1.02 with 11 months at 1.50.

You do not have to use every month. Used as a short bridge to a new job’s plan, 3 months on this plan cost $2,448. You can drop COBRA whenever you have other coverage.

When Is Each Payment Due, and What Happens When One Is Late?

You get at least 60 days to elect COBRA, at least 45 days after electing to make the first payment, and a 30-day grace period for each later payment. Miss a grace period, and the plan can end your coverage.

The First Payment Can Be Large

Per the DOL guide, coverage may reach back to the date you lost it, depending on plan rules. So the first check can cover several months at once. On the $816 plan, three months due together means $2,448 in one payment.

Later Payments Follow a Monthly Clock

Each monthly premium has its own due date and a grace period of at least 30 days. Federal rules let a plan end COBRA for any month without timely payment. Set a calendar reminder for each due date, because a lapse cannot be undone by paying late.

Which Sources of Money Can Soften the Cost?

Three things can lower what you pay out of pocket: employer help, savings accounts, and cheaper coverage elsewhere. Each has its own rules, so check them before you sign up.

Employer help. The DOL guide notes that some employers pay part or all of COBRA in a severance package. This is not required, so ask during your exit talks.

Health savings account. IRS Publication 969 (for tax year 2025) lists COBRA premiums as a qualified medical expense for HSA money. That makes an HSA balance a real COBRA fund. Our guide to how an HSA differs from an FSA explains which account you may hold.

Marketplace plans. HealthCare.gov says you can compare COBRA with Marketplace plans before you choose. You can enroll there within 60 days of losing job-based coverage. Dropping COBRA on purpose later does not open a new enrollment window.

For ways to trim any premium, read our tips on how to lower your insurance premiums.

FAQs About COBRA Premiums

Sources

This article explains federal COBRA pricing limits for education only and is not legal, tax, or insurance advice. Your plan’s election notice sets your actual premium and deadlines, and some states have their own continuation rules for smaller employers. Reviewed for accuracy by Prof. Dr. Khalil Mudassar, PhD. Last updated September 27, 2026.