COBRA for self-insured medical plan

[Guest BenefitsBenefits]

I am receiving conflicting information regarding how to calculate COBRA rates for a partially self-insured medical plan. The broker and plan administrator have advised that we should use the following calculation:

Specific Premium + Aggregate Premium + Max Aggregate Factor + Administration fee + Network Fee + 2%.

I believe that it is incorrect to use the max aggregate because that represents an inflated rate.

Am I correct? If so, what are the consequences of using the max aggregate in a COBRA rate calculation? Is there any official guidance on this topic?

[papogi]

No consequences. Using the max is the better protection for the Plan, and may or may not end up being inflated rates. COBRA rates in a self-funded environment are going to be up to the Plan Sponsor to decide. What rates are you coming from now? If using the max comes to COBRA rates that are too much of a jump (for your taste) over current rates, perhaps blend the calculated rates with the current rates. At the next rate calculation, you might then be able to use the max without causing such a huge jump in COBRA rates. Either way, blending calculated and current rates is always a good idea, I think.

[Guest BenefitsBenefits]

No consequences. Using the max is the better protection for the Plan, and may or may not end up being inflated rates. COBRA rates in a self-funded environment are going to be up to the Plan Sponsor to decide. What rates are you coming from now? If using the max comes to COBRA rates that are too much of a jump (for your taste) over current rates, perhaps blend the calculated rates with the current rates. At the next rate calculation, you might then be able to use the max without causing such a huge jump in COBRA rates. Either way, blending calculated and current rates is always a good idea, I think.

Thank You for the reply!!! Do you know where I can reference any regs or official guidance on the calculation of COBRA rates for a self-insured plan?

[leevena]

I agree with papogi. I do have a couple of questions for BenefitsBenefits. The first is what was the conflicting information? You mention what the broker/plan adminstrator told you to do, but what was the other formula and who provided it to you?

The second is why would you not believe your broker/plan administrator? Don't get me wrong, I know there are many brokers/administrators that make mistakes, but it seems to me that if you are unwilling to believe them, then you must have some history of problems in the past. And if you have had similar problems, why do you still use them.

[papogi]

There is no specific guidance that I am aware of for the calculation of COBRA rates in a self-funded environment. What is important, in my view, is that you have a clear paper trail showing how you arrived at your rates, what assumptions were used, and that it shows a reasonable effort to come up with "meaningful" COBRA rates (your formula does this). In the end, COBRA rates are an educated guess. Your documentation should back up the "educated" part of that. In addition, it is most important that the rates are applied uniformly, with no discrimination.