COBRA cost when non-smokers get a discount

[Guest Benefitsrock]

We give a discount to participants who smoke but sign up for our stop smoking campaign. Any thoughts on whether a COBRA person also has to be allowed to sign up for the stop smoking campaign so they can get the discount? Thanks!

[Guest morris]

I would say yes. The program is a plan that provides a benefit (reduced cost) for a health plan. Thus it would be made available to COBRA beneficiaries just as any other employee.

[oriecat]

I don't know if I agree with this. I don't have any cites, and I don't have time to dig into it, but I think the benefit portion of insurance premiums is a separate issue from COBRA. If I charge employees $80 a month for their coverage, I can charge them the full price plus 2% for COBRA. I don't think that changes if I decide to only charge them $60 a month. Unless you want to say that the "benefit plan" for the discount is also subject to COBRA, and then I would say, then you can charge them the full price plus 2%, so then technically they are paying for their own discount. Just my opinion and I could be totally wrong.

[leevena]

The employer can develop a COBRA rate of no more than the full rate+admin charge. But the employer could also charge less, if they so desire. My guess is that they would need to review company policy and maybe change plan documents, if applicable. But since the COBRA people are ex employees, it would seem to be a waste of time/money to do this.

[Guest Sieve]

I disagree. I think that the individual must be given the opportunity to elect coverage (& reduced premiums) under the stop-smoking coverage, since an employee not suffering a COBRA event has that coverage available. See IRC Section 4980B(f)(4)(A), which defines the applicable premium that can be charged, and Section 4980B(f)(2)(A), which defines the type of coverage that must be made available to COBRA continuees.

[leevena]

I disagree. I think that the individual must be given the opportunity to elect coverage (& reduced premiums) under the stop-smoking coverage, since an employee not suffering a COBRA event has that coverage available. See IRC Section 4980B(f)(4)(A), which defines the applicable premium that can be charged, and Section 4980B(f)(2)(A), which defines the type of coverage that must be made available to COBRA continuees.

Then maybe I am confused. The employer is not changing the premium rate, it is changing the employer contribution. For example, single rate is $400/cobra is $408 and the employer contributers $300 towards the cost of the plan. The cobra enrollee is not receiving the ER contribution of $300. So if the ER makes a different level of contribution available, it does not affect the cobra person. What am I missing?

[Chaz]

For what it's worth, I agree with leevena and oriecat. The employer can charge COBRA participants 102% of the cost of coverage; the discount only goes to the amount of employer contribution, which of course does not need to be given to COBRA participants.

Just my two cents.

[GMK]

I'm with oriecat, leevena, and Chaz.

Basically, on COBRA, you get the same coverages, options, etc. as employees, except you pay the full premium.

Of course, an employer can choose to contribute to the premiums for COBRA's, but it's not required.

[Guest Sieve]

I misunderstood--I thought that there was a reduced premium charged by the insurance company for the soon-to-be-non-smokers, and the premiums for both coverages were passed on to employees. But, you're now saying that the employer is charged the same premium for both groups, but is paying a portion of the stop-smoking coverage.

Tell me -- if employees are paying the full premium, what's the advantage to the employer to pay a portion of the premium for those who are on a stop smoking program?

[GMK]

if employees are paying the full premium,

I don't think anyone is saying that the employees are paying the full premium. Most likely, they're not. But those on COBRA do pay the full premium.

I think the company's rationale for the discount to those in a stop smoking program is the same as it is for any financial incentive to participate in a wellness program. Long term, the hope is to have healthier employees whose productivity is not degraded by bad health and whose medical costs (a factor in insurance rates) and sick time absences are reduced.

[Guest Sieve]

Isn't there also the hope on the employer's side that premiums will decrease if all smokers stop smoking?

Hypothetically, let's say that the employer is being charged different premiums by the insurance co. for those employee on the stop smoking program and those not on that program--say $900/mo. vs. $1,200/mo. In that case, does a COBRA continuee have the opportunity to pay 102% of the premium of the coverage he was enrolled in at the time of the qualifying event, and also the chance to change coverages during the open enrollment period?

[leevena]

Isn't there also the hope on the employer's side that premiums will decrease if all smokers stop smoking?

Hypothetically, let's say that the employer is being charged different premiums by the insurance co. for those employee on the stop smoking program and those not on that program--say $900/mo. vs. $1,200/mo. In that case, does a COBRA continuee have the opportunity to pay 102% of the premium of the coverage he was enrolled in at the time of the qualifying event, and also the chance to change coverages during the open enrollment period?

There is always hope, but it does not always translate into reality. When I was young I had hoped for a wife just like mom...great cook, made meals that my dad liked, did my laundry, ironed my sheets, let me use two towels in the shower, and so on. What do you think happened? LOL

All joking aside, if the carrier did charge less premium, then the cobra rates would be different. As for the ability to impact their claims cost, it would depend on how the group's costs were determined (pooled or experience rating) and if the number of smokers were large enough to appreciably decrease their claims.

[Guest Sieve]

At the risk of being politically incorrect, you and I are married to twins separated at birth . . .

[leevena]

29 wonderful years for me. Wouldn't trade her for anyone else. Have a good weekend.