Cobra Laws - What criteria is used for setting these premiums, and are

[Guest camann]

I have a question regarding how the rates for cobra coverage are determind. I terminated my position and was part of a group coverage policy, and I did a fair amount of research on cobra and estimated my payment to increase at 100% plus admin fees. I was completely shocked when my package arrived and the (cobra)insurance rates had tripled plus some! Is this legal and is there anyway for me to find out how these rates were determind? Thank you for your help.

[Guest Sppedraza]

Fed COBRA is limited to 102% of the employer's actual cost in most cases. Disability cases higher. Your "tripled plus some cost" would depend on how much as a percentage you the employee paid versus how much the employer absorbed each month. For example, if you paid $60 each month but the total employer cost was $300. You should expect your COBRA cost to be 102% of $300 or $306 per month - 5X higher(Compared to your 3X plus). You would need to know how much the employer was charged for your monthly coverage to check the accuracy of the COBRA cost...Good Luck

[Kirk Maldonado]

You'll really need luck if the plan is self-funded (rather than being funded through an insurance policy)!

[Guest camann]

Thank you for your help. What I failed to say is that this is with United Healthcare and is a traditional group insurance policy.

[Guest Damien]

Kirk, I am just curious. Why would it be worse in the case of a self-funded plan?

[Kirk Maldonado]

In a self-funded plan, there are no insurance premiums (charged to participants). As a practical matter, the COBRA costs must be actuarially determined.

[KIP KRAUS]

Kirk:

Even while I will agree that technically employees are not charged premiums under a self-insured plan the contributions that they pay are typically related to a fully insured equivalent rate.

With the exception of insurer risk charges and profit margins most elements of a self-insured plan are identical to the elements of a fully insured plan and equivalent rates can be actuarially developed from this information. This is how you can determine what percentage of the cost of the plan you wish your employees to pay. In addition, you also get your COBRA rates from the equivalent rate.

[Greg Judd]

Originally posted by Kirk Maldonado

In a self-funded plan, there are no insurance premiums (charged to participants).  As a practical matter, the COBRA costs must be actuarially determined.

Or at least figured based on decent historical health cost information (for the case, or like businesses, or from resources provided by actuarial firms), combined with reasonable info on turnover/headcount variation.

If camann lifted the veil & gave us his/her COBRA rate - rounded to the nearest $10, or even $50 - we'd have a better idea if we're nearing the ticket window, if not actually into the ballpark. Adding their basis for making the "100% + admin fees" calculation could be handy, too....