Question: We understand COBRA rates can only be increased once every 12 months. How is the 12-month period determined?
Answer: The determination period is any 12-month period selected by the plan as long as it is applied consistently from year to year. For ease of administration, most employers choose the plan year as their 12-month period.
For instance, for a calendar-year plan, the first day of the 12-month period is January 1, which conveniently is also the date that open enrollment choices and insurance renewal rates take effect.
COBRA rates must be fixed in advance. Rates cannot be increased after the 12-month determination period starts, although there are three exceptions to this rule. The exceptions are:
- The plan previously charged less than 102 percent of the premium and the new rate does not exceed 102 percent of the premium;
- The COBRA participant qualifies for the disability extension period and the new rate does not exceed 150 percent of the premium; or
- The COBRA participant changes their election, such as changing from single to family coverage in connection with family status change.