Q.- We are thinking of changing to a self-funded plan. How will we determine the amount to charge COBRA continuants?
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.