What Happens If You Are Late Paying Your COBRA Premium

If you’re using COBRA health insurance, chances are you’ve lost (or left) your job, gotten a divorce, aged off a parent's health plan, or your spouse transitioned to Medicare or passed away. Any of these situations can make your finances fragile and your bills harder than usual to pay. Likewise, the stressfulness of these situations can make you prone to lose track of details here or there.

Although the deadline to pay your COBRA health insurance premium is a bad detail to forget, you aren’t the first person to be late paying your COBRA premium. The consequences of being late paying for COBRA can range from a bit of a hassle to permanently losing your COBRA coverage. What happens in your situation depends on whether you’re late on your initial COBRA premium payment or late with a payment for ongoing COBRA coverage.

It's also important to note that under COBRA rules, the health plan is not required to send monthly premium notices. Your plan may do so, but it's wise to set yourself some sort of reminder to ensure that you remember to pay your premium, even if you don't get a premium notice from the insurance company.

woman on phone while a man looks stressed holding bills
Jose Luis Pelaez Inc / Getty Images

Temporary Extension of COBRA Deadlines Due to COVID-19

This article is based on the normal payment deadlines that apply to COBRA. But in 2020, to address the COVID-19 pandemic, the Department of Labor issued temporary extensions to the deadlines that normally apply for electing COBRA, paying the initial premium, and paying subsequent premiums. All of these deadlines were extended for either one year, or past the end of the "outbreak period," which was defined as beginning March 1, 2020, but had not yet been assigned an end date.

As of March 2021, an end date for the outbreak period is still not clear, but some plan participants will have reached, or be nearing, the one-year mark from when they were first eligible for COBRA. To address this amid the ongoing pandemic, the Department of Labor, Employee Benefits Security Administration published EBSA Disaster Relief Notice 2021-01 in February 2021. The notice clarifies the provisions of the original relief, but also notes that:

"The Department of Labor recognizes that affected plan participants and beneficiaries may continue to encounter an array of problems due to the ongoing nature of the COVID-19 pandemic in circumstances under which relief under the Notices is no longer available due to the statutory one-year limit on the Agencies’ authority to grant relief. The guiding principle for administering employee benefit plans is to act reasonably, prudently, and in the interest of the workers and their families who rely on their health, retirement, and other employee benefit plans for their physical and economic well-being. This means that plan fiduciaries should make reasonable accommodations to prevent the loss of or undue delay in payment of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames."

In other words, the Department of Labor is instructing plan administrators to be as flexible as possible during the COVID pandemic, in terms of allowing people to elect COBRA and keep coverage in force going forward.

So if you've struggled to elect COBRA or pay your COBRA premiums amid the COVID-19 pandemic, reach out to your health plan to see what arrangements you can make, and know that the rules have been temporarily relaxed.

As described in the next section, there is also a new federal subsidy that covers the cost of COBRA from April 2021 through September 2021. And some people who previously rejected or terminated their COBRA coverage will have another opportunity to enroll in it.

After that, you'll find is a summary of how COBRA payment deadlines normally work, and how they'll work again once the COVID-19 outbreak period has ended.

Federal COBRA subsidies in the American Rescue Plan

The American Rescue Plan, enacted in March 2021, is a sweeping COVID relief measure. Among many other things, it provides the third round of stimulus checks to most Americans, extends the additional federal unemployment compensation that began soon after the pandemic started, and makes health insurance more affordable for millions of people.

One of the health insurance provisions is a temporary federal subsidy that covers 100% of the cost of COBRA coverage from April 1, 2021 through September 30, 2021, for people who involuntarily lost their jobs or had their hours reduced below the level that makes health insurance available. This subsidy is outlined in Section 9501 of the American Rescue Plan.

The federal COBRA subsidy is available to people already enrolled in COBRA, and to people who newly enroll in COBRA during the April - September window. But again, it's only available if you involuntarily lost your job or had your hours reduced; if you left your job voluntarily or opted to transition to part-time work, you would not be eligible for the COBRA subsidy.

The legislation also allows people another opportunity to elect COBRA if they rejected it or let it terminate recently enough that it would otherwise still have been in force. So for example, if you had the chance to elect COBRA as of July 2020 but chose not to do so, you'll have another chance as a result of the American Rescue Plan. Your original 18-month COBRA window would have run from July 2020 through December 2021, and the new law does not change that—your termination date would still be the end of December 2021. But although COBRA election is normally a one-shot opportunity, the American Rescue Plan gives people in this situation another chance. In this example, you'd be able to enroll with coverage effective April 1, 2021, and receive free coverage (fully subsidized by the federal government) from April through September. If you then chose to continue the coverage through December, you'd be able to do so by paying the final three months of premiums yourself.

Now let's take a look at how COBRA rules normally work, and how they're expected to once again work after the COVID pandemic subsides:

Late Paying Your Initial COBRA Premium

Your Initial COBRA premium must normally be paid within 45 days of the time you elect COBRA coverage. Your COBRA administrator will consider the date your COBRA election form is postmarked to be the date you elect COBRA. That postmark sets your 45-day clock ticking.

This initial COBRA premium payment might be larger than subsequent monthly payments since it could cover more than one month of health insurance coverage, depending on how soon you elect COBRA.

For example, let's say you get laid off on June 15, your coverage is scheduled to end on June 30, and you elect COBRA on August 10. You'll have another 45 days to pay your first premium (so it will be due September 24), but you're going to have to get caught up on premiums for July, August, and September at that point.

There is no grace period if you’re late paying your initial COBRA premium payment. If it isn’t paid on time (ie, within 45 days of electing COBRA), you lose your right to have COBRA coverage; you’ll have to find other health insurance options or you’ll be uninsured. However, in a situation like the one described above, in which a person has to pay multiple months of COBRA premiums, the health plan must allow at least a 30-day grace period for the months after the first month (this applies to all months after the first month, as described below). So in the example above, if the person is paying their initial payment by September 24, they'd need to pay the July and August premiums in full. But assuming payments are due on the first of the month, they'd have until September 30 to pay September's premium.

Late Paying for Ongoing COBRA Health Insurance

While premium payments for ongoing COBRA coverage should be paid by the date the plan says they’re due, you have a little more flexibility than you did with your initial COBRA payment. There’s a minimum 30-day grace period for late premium payments, so the plan cannot terminate your coverage if, for example, you're 10 days late in paying your premium one month. But if you don’t make your premium payment either on time or within the 30-day grace period, your coverage can be canceled permanently.

You're still covered during the grace period, as long as you ultimately do end up making your payment by the end of the grace period. But if you don't, your coverage will be terminated back to the last date for which you had paid a premium. See this sample termination letter from the Society for Human Resource Management for clarification; any medical bills that had been incurred during the grace period would not end up being covered under the COBRA policy.

An Example

Let’s say you’ve been on COBRA continuation health insurance for six months. Your health plan sets May 25 as the due date for your premium for coverage from June 1 through June 30. You miss the May 25 deadline and enter your grace period.

You break your ankle on June 10 and rack up an emergency room bill for $4,000. On June 15, you hobble to the post office on crutches, mailing your late COBRA premium payment well within the 30-day grace period. Your health insurance company has to credit your payment for June, ensuring that you continue to have seamless coverage.

If you had waited until June 26 to make your late COBRA premium payment, you would have been beyond the 30-day grace period and your COBRA coverage would have been canceled permanently (assuming your plan uses the minimum required grace period; plans can offer longer grace periods if they choose to do so). You would be uninsured, and you would have no help paying that ER bill. The 30-day grace period is measured from the premium due date, not from the start of the coverage period.

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8 Sources
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  1. U.S. Department of Labor; Employee Benefits Security Administration. FAQs on COBRA continuation health coverage for employers and advisers.

  2. Miller, Stephen. Society for Human Resource Management. DOL Temporarily Extends COBRA Sign-Up Deadlines.

  3. U.S. Department of Labor. Employee Benefits Security Administration. EBSA Disaster Relief Notice.

  4. Congress.gov. H.R.1319: American Rescue Plan Act.

  5. U.S. Department of Labor, Employee Benefits Security Administration. An employer's guide to group health continuation coverage under COBRA.

  6. Brown & Brown of Louisiana, LLC. Compliance Overview. COBRA Premiums.

  7. Society for Human Resource Management. COBRA: Termination of coverage notice.

  8. Centers for Medicare and Medicaid Services. COBRA continuation coverage questions and answers.