COBRA/Section 105(h)

[Christine Roberts]

If COBRA covers a self-insured medical expense reimbursement plan under Code Sec. 105(h), but is very unlikely to be invoked (due to fact that "premium" for COBRA coverage will cost 2% more than the reimbursements themselves)how best to handle COBRA notification requirements - without confusing employees as to what "benefit" they would receive from COBRA?

------------------

[KIP KRAUS]

Christine:

There shouldn't be any confusion to COBRA participants, because COBRA requires Self-insured medical plans to develope fully-insured equivalent rates to be used for COBRA. These rates would include all of elaments of a fully-insured plan (e.g.,paid claims, a reserve assumption,trend, any stop loss premiums, claims administration charges, etc.) Perhaps the claims administrator may be able to help with calculating these rates. Once the rates are developed, and revised annually you simply bill them to COBRA participants as fully-insured rates plus 2%.