How do premium subsidies affect COBRA?

• A. Subsidies can reduce the amount owed; federal subsidies may apply in specific programs, but general COBRA premiums follow the 102% rule unless subsidies apply.
• B. Subsidies eliminate COBRA premiums entirely.
• C. Subsidies only apply to plan administrators’ penalties.
• D. Subsidies double the premium due.

Answer: (A)

The key idea is that COBRA premiums are normally 102% of what the plan would cost the employee to keep coverage, covering the actual cost plus up to a 2% admin fee. Premium subsidies come from government programs and can reduce that amount for eligible individuals. So, premiums can be lower when a subsidy applies, but outside of those subsidy periods the 102% rule stands. The correct answer notes that subsidies may reduce what you owe, and that federal subsidies can apply in specific programs, while the general COBRA premium follows the 102% rule unless a subsidy is in place.

Subsidies don’t universally wipe out COBRA costs, they don’t pertain only to plan administrators’ penalties, and they don’t double the premium.