COBRA requires a period of time during which the applicable premium charged to a qualified beneficiary (QB) cannot change (unless an exception applies.)
All plans must calculate and fix the applicable premium (or premiums) in advance for a 12-month period called the “determination period.” The determination period is set for all qualified beneficiaries under an employer plan and is usually in sync with the group health plan policy year. So regardless of when an individual might be offered COBRA, their rates are set for the remainder of the determination period. An employer can impose new rates with the start of the next determination period.
The determination period applies only to federal COBRA regulations and not to state continuation.
There are limited times when the employer is permitted to change the premiums for COBRA QBs during the determination period.
Exceptions to the 12 month Rule
There are four situations that allow an employer to increase COBRA premiums other than at the beginning of the determination period. They are:
- Increasing the premium for an individual due to the disability extension being applied during the period – COBRA regulations allow the employer to charge up to 150% of the active employee premium during the 11-month disability extension so long as the disabled QB is still enrolled in the coverage.
- Increasing the premium to add on the administrative fee (either the 2% or 50%)
- Increasing the premium because the QB changes to a different coverage level or a different plan (for example changing from an HMO to a PPO or from single to Employee + 1 coverage)
- Increasing the premium because the employer changes insurance carriers and the increased rates apply to the active group
For more information on COBRA please attend or listen to the recording of the upcoming Boot Camps on COBRA. This is a 4 part series beginning in June. Registration links and session details can be found at: http://www.ebcflex.com/Education/Webinars.aspx