Composite COBRA Premium Rate

[Guest Cha1]

A union welfare fund is charging COBRA beneficiaries a composite rate. The composite rate has not changed since June 1, 1999.

Does anyone see problems here? I don't know if the plan is self insured but I believe individual and family rate tiers should be standard in any event. Also, for the rate not to have changed in 3 years given the 102% rule is virtually impossible. What do you think is going on here and what recourse does the individual on COBRA have?

Thanks

[GBurns]

It would appear that given that health insurance rates have usually increased each year, a COBRA beneficiary who is being charged at the 1999 rates is being undercharged. Why would they complain?

If a beneficiary is getting Family coverage at the individual rate, Again, Why complain?

Would you want them to retroactively pay any increase that they should have paid?

In any event I remember that the rate must not exceed 102%, I do not remember anything that said it must be at 102%.

[Guest Cha1]

If the covered individual is single, a composite rate, in this case $670/mo, though lower than a family rate, is much higher than a single employee rate. Additionally I would be very surprized if this plan has been subsidizing COBRA premium rates for the past three years.

[Guest Cha1]

Furthermore, according to IRS Revenue Ruling 96-8 a single ex-spouse of an active employee cannot be charged more than the comparable COBRA premium for a single active employee (plus 2 percent). That ex-spouse cannot be charged a dependent rate that is more than the single employee rate.

[Kirk Maldonado]

My recollection is that Revenue Ruling does not address a situation where the plan uses a composite rate, so I'm not sure that it is binding guidance in this situation.

[mroberts]

Cha1 - are your active employees being charged a composite rate? If they are, then I don't see a problem here. If they are not, then that would be a problem since you can only charge up to 102% of premium and this would obviously throw the individual rate well over what was being paid for an active rate.

[Guest Cha1]

Thanks for the replies.

Suppose the plan is non contrib and self insured. In any event active employees are not likely to be charged the full rate so what active employees contibute is not a factor. I seems to me that the reg. 96-8 rule should apply and tiered costs determined even when the employer is funding the plan on a composite rate basis.

Is any disclosure regarding subsidy by the plan required?