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A Service of OnQue Technologies, Inc. |
| COBRA & Health Reimbursement
Arrangements |
December 1, 2005
By Scott Haines, President
OnQue Technologies, Inc.
Santa Rosa, CA |
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The
following is an excerpt from Questions and Answers from the COBRA Help Desk–Part
I.
Client: We have a client who maintains an
HRA. They have a participant who recently terminated and has elected to
participate in COBRA. We have two basic questions:
- What notifications must be made
for the HRA portion of COBRA?
- We understand that a qualified
beneficiary who has elected continuation coverage under COBRA must pay an
“applicable premium” for the period of coverage. How do we determine
the applicable premium?
OnQue: Our COBRA Tip of January 3, 2005,
provides a good overview of the COBRA issues relating to HRAs: "HRAs: Are They Subject to COBRA?".
What notifications must be made for the HRA
portion of COBRA?
There are no special notification requirements with
respect to HRAs; the general notice, the qualifying event notice and election
form should list the HRA as a benefit subject to COBRA.
How do we determine the
applicable premium?
This is a tough question, because the IRS
guidelines leave much to be desired (that's an understatement), although the
agency has promised to issue more specific guidelines in the future. As stated
in the article referenced above, the premium should be based on the
"actuarially determined" cost to provide coverage under the plan. Here's the
problem—HRAs have not been available long enough to provide the
utilization data needed to make accurate actuarial calculations. Further, the
cost of actuarial determination may be too high for many small employers to
bear.
Alternatively, the employer could look to the
carrier for assistance in determining the appropriate premium, particularly in
the first plan year. After that, premium calculation could be based on claims
experience.
Unfortunately, a formula for calculating HRA
premiums does not exist and no one has a handle on how to calculate the
premiums accurately. Actuarial determination is probably the best bet for
ensuring compliance, though its benefits are limited by the factors mentioned
earlier. |
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| Related COBRA Tips |
| HRAs: Are They
Subject to COBRA? |
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This information is provided by
OnQue Technologies, Inc. for educational purposes only and does not constitute
legal advice. If legal advice or other professional assistance is required, the
services of a competent professional should be sought.
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