Mistake in Communicating COBRA Premiums

[Guest K.C.]

A plan's determination period begins July 1st. The COBRA premiums increased as of that date. However, due to a billing error, the July COBRA premium billing that was sent out included the lesser premium rates from the previous determination period. The error was fixed with the August billing. However, the employer would like to collect the July underpayment amount from the qualified beneficiaries, and terminate coverage (after satisfying all requirements for doing so) if a qualified beneficiary refuses to pay the difference between the lesser amount billed in July and the actual COBRA premium amount that should have been billed.

Is this permissible?

[Jacmo]

I should think so. The employer is simply correcting a billing error. As long as the COBRA beneficiary in question is treated as any other employee or COBRA beneficiary, there should be no problem with correcting an error.

[Guest Sieve]

How do you deal with medical claims from July being paid prior to the former employee's refusal to pay the differential for July and subsequent cancellation of coverage? And what about August claims for those who will not pay the additional premium for the prior month? If the difference is substantial, perhaps the employer should consider spreading it out over a few monthly premium payments.

[GBurns]

Don't you have to notify of a premium increase BEFORE it is due ?

Also the employer knew of the increase before July 1 and so had ample time to send the notice even if the subsequent billing was wrong.

I see the employer at fault even if the participants owe. In any case I wonder how much money is at stake to warrant an employer considering getting aggressive. I suspect that just a few refusing to pay and terminating coverage would cost this employer more than they are trying to collect.

[Guest K.C.]

Thank you, everyone, for your replies. I came to the same conclusion as GBurns based on Q&A 5 from the 2008 ABA meeting with the DOL. It just isn't worth it to pursue this, given that the QBs were not notified in advance of the increase.