How often can Cobra rates be raised?

[Guest bgvermont]

My organization's Cobra rates are far below the actual cost of insurance. With a new health plan and rates going into effect soon, we would like to raise the Cobra rates to where they should be, but it is such a significant jump, most people (including long term employees who are now retirees) will not be able to afford it. We thought we could perhaps inform them what the costs will be, but raise them in 2 to 3 increments over a 6 month period. All legal regs I can find say "in general" you can raise rates once prior to a 12 month period. But, if we inform people what the final rates will be, and raise them incrementally to that point, is that acceptable? Thank you.

[jeanine]

My understanding is that you can only raise rates just prior to the 12 month period and that those rates are then good for 12 months. The only way I could see an incremental approach working would be to set the higher rate at the proper time (yearly renewal) and inform your enrollees that that is the new 12 month rate. You could subsidize the premium and gradually cut back the amount of the subsidy, but that probably isn't the result you want.

[Guest HAP]

COBRA premium can be up to 102% of the "similarily situated" employee premium. (This can vary in self-insured plans and in 11 month disability extensions.) The first answer was correct, rates can be changed once per 12 month determination period; however, if you are not charging a full 102% of the premium, you may correct the rates mid period.

It sounds like you have some concern for the participants on your plan being able to afford the increase: give them warning.

Example, your regular determination period might be 11/1-10/31. Let enrollees know what the new rates are effective 11/1, but inform them you won't start charging these rates until 1/1. This gives people time to shop the private insurance market.

[Guest bgvermont]

Thank you, that helped a lot!