COBRA and your HRA
HRAs qualify for COBRA coverage
Health reimbursement arrangements (HRAs) are subject to COBRA continuation requirements and time limitations (
review COBRA rules), just as any other group plan is. When a member qualifies for COBRA, they can continue to receive the same HRA employer contributions as active employees.
As the plan sponsor, you are entitled to charge a separate premium for the HRA COBRA benefit in addition to the premium for the medical COBRA benefit. You set and collect this separate premium to help pay for HRA claims because HRAs are self-funded. Priority Health or your COBRA administrator do not establish or collect the HRA premium, but you do have to notify your COBRA administrator about the specific premium amount.
Determining HRA COBRA premium
Figuring premium is not as easy as dividing your annual HRA contribution by 12 and adding 2% to cover administrative costs. You must use one of 2 methods to determine HRA COBRA premium for your employees.
Keep in mind:
- You must calculate HRA COBRA premiums prior to each 12-month determination period.
- You can't charge different HRA COBRA premiums to different beneficiaries. The premium must be the same for everyone.
- The HRA COBRA premium is added to the medical COBRA premium.
Actuarial determination method
With actuarial determination, you must make a reasonable estimate of the cost of providing HRA coverage to similarly situated active employees and use a formula to figure monthly premium.
Example: You estimate that your entire employee population spends 50% of allotted HRA dollars. You set a $1,000 HRA contribution. Calculate your premium like this:
- $1,000 x 50% (.5) = $500
- $500/12 (months) = $41.67
- $41.67x.02 (2% administration fee) = $.83
- $41.67+$.83 = total month premium of $42.50
Companies with a newly established HRA must use the actuarial determination method because they have no HRA cost history for the prior year.
Past cost method
With the past cost method, you calculate HRA COBRA premiums based on past HRA expenses.
