Can premiums be raised for over-65 persons once they retire?

[Guest lschaab]

If an employer sponsors an experience rated medical plan which operates on a 3/1 to 2/28 plan year, can the insurer charge more when the person terminates from employment? A detail I should share is that the employee turned 65 in January, the premium did not adjust at that time, but when the employee termed in June the insurer adjusted the premium (by increasing it).

[Sandra Pearce]

An employee in most cases is only paying a small percentage of the total cost or value of their health insurance coverage, with the employer paying a share of the cost. When someone terminates employment they are generally offered COBRA continuation coverage at the full cost or value of the coverage plus 2% administrative fee. This is almost always a considerably higher amount than the person was paying while still employed.

[Guest b2kates]

Generally, under COBRA, there is a once per 12 month period when the rate may be adjusted.

this is the "Determination period" see IRC Section 4980B(f).

Once the rate is determined, it is fixed for the entire 12 month period. Accordingly, a rate may change after the participant is COBRA eligible.

[Guest lschaab]

Thanks for your input, however, your responses have me thinking that I should share a little more detail. The premium as an active employee was roughly $200/month, of which the employee shared $50 (monthly). When COBRA was accepted the insurer doubled the premium on the basis that medicare was now primary.

Also I understand the determination period (to some extent) and would believe that the contract year represents the determination period and thus the doubling of premium cannot be justified.

What am I missing, and what questions haven't I asked?

[Guest eafredel]

lschaab,

If I read your last post correctly, you are saying that the premium for active employees is $200 per month, while the COBRA premium (at least for former employees over age 65) is $400 per month. The explanation you have received is that Medicare is primary. This does not make sense. I would ask the following questions:

1. Did the employee elect COBRA coverage upon termination?

2. If the employee elected COBRA coverage upon termination, why did the premium increase so significantly?

3. Why isn't the premium limited to 102% of the $200 premium paid for active employees?

Is it possible that the former employee elected to convert to an individual policy? Is the former employee disabled? Is it possible the former employee changed his or her coverage level?

[Sandra Pearce]

I agree with the previous post. Are you sure what the determination period is? Ours does not coincide exactly with the plan year because we choose to give rate increase/change information to our participants well in advance of the change. Additionally, having Medicare as primary should actually lower the cost to the plan and not increase it.

[Guest lschaab]

Eafredel - my answers to your questions are: (1.) the participant was offered COBRA and accepted COBRA. (2) The rate being charged by the insurer prior to termination was $200 (for example), and that was the rate that was communicated to the participant in the COBRA notice (+ the 2%). The carrier then adjusted its billing for this person, only, and increased it to $400. The rates above are not exact, but the doubling is. (3) I don't know why the premium doubled, the insurance company claims it is due to the type of contract that the plan sponsor has in place, it is an experience rated contract. (4) The employee did not enroll in a individual policy, the application for COBRA was processed through the 'group' under its COBRA subgroup. My feeling is that the premium for similarly situated employees ($200) must be charged. There are no other plans or levels of coverage in place, and there are only multiple locations in the same geographic area so the premium is not adjusted due to geography.

We are getting pressure to cancel the contract due to the 'significant' disparity in premium being remitted, however, we are reluctant to cancel due to the lack of specific information from the carrier to validate the increase in premium. If we terminated the contract, I think we have committed a major mistake.

Being that all my answers to your questions are no, which leads me to believe that the insurer cannot justify why (and has danced around the issue coming back with answers to questions that are close to the topic, but just vague enough to lead me to beleive they just don't know or are stalling)...

[Guest eafredel]

lschaab,

I am as confounded as you are. It sounds as though it would be very difficult to establish that the insurance contract complies with COBRA (and possibly even with federal age discrimination rules). I would ask the insurance company to explain the reason for the increase in premium to you in writing.