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Guest AHayhow

Credit Card payments for COBRA

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Guest AHayhow   
Guest AHayhow

Is it possible for TPAs to accept credit cards for COBRA premium payments? I can't find anything that states that payments must be made by check, money order, etc. Is there a law that states credit cards can't be used? If it IS possible, are we able to pass the fees that we're charged to run the cards on to the participants? If so, how?

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oriecat    0

This is just my gut feeling, nothing to back it up. I would think that if someone had the capability and wanted to accept credit card payments, I do not see why it wouldn't be ok. But the law is specific that the most you can charge is 102% of the premium*, so you could not increase your premium to cover the visa fees, if you are already charging the max. If you're not charging the 102% then you could increase it to that, but it would have to be at your annual renewal, as COBRA rates have to be fixed for a 12 month period.

* - with the exception of the 150% for the disability extension.

Edited by oriecat

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GBurns    17

I have never thought about this before, but it comes to my mind that even though you can only charge 102% max. for COBRA, if an employee paid with acheck that bounced, you are allowed to charge him a "bounced check" fee and collection expenses. You are therefore able to go beyond 102% because the "extra" is not a charge related to the insurance coverage but is a charge related to a separate item, the physical check.

Using that logic, it seems reasonable to charge the credit card fee. Bear in mind that the employer is not really charging the employee the fee, but is in reality only collecting the fee on behalf of the credit card company. The employer does not get to keep the fee so it is really not a charge by the employer. The 2% is kepy by the employer the credit card charge is not.

This is analogous to sales tax, We misstate when we say that we charge sales tax on purchases, in reality and under the law, the seller only coolects on behalf of the state and has to turn over the sales tax collected (although we say charged).

The sales tax is not kept by the seller neither is the credit card charge. The sales tax is not imposed by the seller neither is the credit card charge imposed by the employer. In both cases it is only being collected on behalf of some other entity.

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I still would be hesitant to pass along the charge card fee, as it is a convenience fee to the employer to assure it gets paid even if the bank/issuer of the card is not yet paid in full. Seems like one also could compare this with a penalty or late fee charged by an insurance company for making a late premium payment. If the employer collects the employees' portions of the fees but fails to make its total premium payment on time (assume an oddity in the withdrawal and payment dates that results in a gap but the amounts still are passed along as soon as possible within the ERISA fiduciary rules), it bears the brunt for that additional fee.

Any thoughts, or amy I stretching this too far?

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GBurns    17

Theresa,

In your scenario the late charges were caused by the employers negligence and therefore it should bear the brunt not the employee.

The credit card fee is not, according to the post, for the convenience of the employer but the TPA trying to facilitate the ex-employees. The post had nothing to do with the employer.

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