Q.- We have a self-funded plan. We factor our broker’s commissions into our COBRA rate. Is this allowed?
A.- The COBRA rules simply say that a plan may require payment of "up to 102% of the applicable premium."
The "applicable premium" is defined in the statute as "with respect to any period of continuation coverage of qualified beneficiaries, the cost to the plan for such period of the coverage for similarly situated beneficiaries with respect to whom a qualifying event has not occurred (without regard to whether such cost is paid by the employer or employee)."
There is very little guidance, besides the definition, on how to actually calculate the applicable premium. Self insured plans come up with their own premiums and generally use actuarial estimates of future costs or look at past costs and index them going forward.
If you factor commissions into the premiums for active employees, you could probably factor commissions into the premiums for COBRA continuants. If commissions are not part of the premiums for active employees, they should not be part of the premiums for COBRA continuants.
