Disclosure of COBRA cost

[maximumengr]

What is the name of your state? What is the name of your state? Maryland

My family and I are covered by COBRA after I lost my job. The cost of the coverage seems unreasonably high.

Is there an third unbiased party we can go to to verify that the employer's paying what he says he's paying? If so, who would that be?

Is there something in the COBRA that requires that the employer or insurer provide a legal and verifiable disclosure of the true costs? How would we verify the cost?

It seems to me that the employer could charge us just about anything and we would never know if he was overcharging us.

Thanks,
Howard

 

[cbg]

I suppose that you could check with the insurance carrier yourself but I'm not sure if they would tell you. If you're looking for some agency somewhere that has access to all the COBRA costs offered by all employers, there isn't one. You could try the state insurance commission.

COBRA is unbelieveably expensive. The company is charging you 102% of what they have been paying. If your portion of the cost has been only 20% of the premium, or maybe even not at all, when you suddenly get hit with the whole thing, it does seem pretty outrageous. I don't know about Maryland, but in my part of the country, family coverage on COBRA can run $800 a month or more. In a few cases I've seen it as over $1000 - thankfully, that's rare. I'm self-employed and currently on COBRA myself from my old job, and I pay over $300 a month for just me.

Yes, the employer is limited to 102% of the actual cost to them, and that's in the law. The problem is, after over 20 years in benefits and HR, including 5 years working for a health insurance carrier, I really don't know where you would go to get proof that they aren't overcharging you. I will tell you, though, that in all that time I have NEVER seen a company overcharge for COBRA.

I have one thought. It won't work if the company paid 100% of the cost while you were employed, but if you paid any portion of the premium it should. I would assume you know what you were paying and what percentage it was supposed to be. Do the math yourself! If you were paying $50 every two weeks and that was 20% of the cost, COBRA should be roughly $510.

 

[javo64]

COBRA - too much?

Louisiana

My husband recently quit his job and we want to continue our coverage under COBRA for a few months. We just received notice about it, and the premium seems unreasonable.

I have done the math and come up with the following: We were paying $136.92 bi-monthly ($273.84 monthly). The employer was supposed to be paying 60% of the premium, leaving us with 40%. That means, the entire premium should be $684.60. Add 2% ($13.69), and you get $698.29.

BUT, they are telling me that the monthly premium for COBRA is $1073.73. I have no idea how they are coming up with this huge amount. So far, my questions have gone unanswered by the company.

Am I missing something in my calculations? Is there some reason that the cost could jump so high? Any suggestions on what to do if they are trying to overcharge me?

 

[cbg]

Please note that message board etiquette dictates that you start your own thread and not "hijack" someone else's. Particularly when the thread is a year and a half old - your question could easily have been overlooked altogether. I'll answer it this time but next time start your own thread, 'kay?

I can think of at least one reason why the cost could have increased that much. If the first month of your COBRA happened to coincide with an increase in cost to the company, they would be required to charge you at the new rates, not the rate that you had been paying in the past.

If this is the case, then you would have been seeing an increase in the premium taken out your paycheck, had you stayed with them.

 

[javo64]

Sorry about "hijacking" someone else's thread - I'm brand new to this forum. I actually didn't even notice how old the thread was until after I submitted - I'm really anxious about this situation. And just to put the pressure on a bit more, my 3 yr. old busted his forehead open last night and had to go to the ER for stitches - here comes a $600 bill! Thanks for answering me anyway.

What you said about the rate increase makes sense, however, when I called the company to inquire about the premium, the girl I talked to didn't mention anything of the kind. Maybe she just didn't know about it. Anyway, she said she would pass on my questions to the head of human resourses. I also left two messages for that lady myself, which have gone unreturned thusfar. I sent a certified letter a few days ago stating that we would like to elect COBRA and requesting documentation of the calculation of the premium. I'm not sure what to do if my letter goes unanswered.

Also, if you're right about the premium increase, does it seem realistic that it would jump from $684 to $1052? That's a huge increase to happen all at once!?!

Thanks

 

[cbg]

Javo64, believe me, I've seen higher increases than that all at once!

Even with the cost of health care as it is today, the kind of increase you're talking about IS on the high side, I'll admit, but is by no means the highest increase I've ever seen. I once (thankfully, only once) saw an increase of 1000% (yes, that says one thousand percent).

I don't know if Louisiana is a "community rated" state, but if it is, then the cost of your company's health insurance is being affected by every company in the risk pool, not just your own. Even if it isn't, an single employee (or dependent) with cancer, or one motorcycle accident, or even one high-risk pregnancy, can do alarming things to the loss ratio, which can send the premium cost skyrocketing.

Hopefully you'll find out that the cost you were quoted is an administrative error. Unfortunately, while I wish I could tell you that what you've seen is beyond the realm of possibility, it is not.

 

[javo64]

I here ya! I know insurance prices are getting more ridiculous every day! I'm just waiting to see if someone answers my letter.

By the way, we live in LA, but I forgot to mention that his job was in FL - we just moved back. I don't know how that affects things though, because the company is a regional airline and they employ people here too. In fact, I was actually living here with my mom for awhile before he quit and moved back. So, even though the job was in FL, the insurance was based here. But I know it doesn't affect the 102% cap since cobra is federal.

Anyway, what makes me suspicious that it's not that the premiums just went up when he quit, is that my husband asked the head of human resources about the price of cobra several months before he quit - we were planning the move for awhile - and she told him it would be over $1K back then, too. I guess I just dismissed it though and didn't really worry about it then because (aside from that the fact that I had enough else to worry about at the time), I figured she was probably mistaken. She didn't actually look it up, just through out a ball-park figure for him.

I wish I had tried to investigate the situation back then, but I guess I just hoped that when the time came and the official premium was quoted, it would be what I expected (or at least close) from doing the math. Stupid, huh!?!

I'm not sure what I'm going to do if they ignore my letter or if they respond by refusing to send me proof of the quote.

Thanks for sharing the benefit of your experience.

 

[cbg]

If you relocated to a different state and will be on the insurance plan for that state, it's ENTIRELY possible that the cost is different.

It is not even remotely unusual for the cost of insurance for employees in different states to be different. The cost may have been $682 or whatever it was in Florida, but that doesn't mean that's what the cost is in Louisiana. And if you're on the plan in LA, those rates apply, NOT the FL ones.

I think we may be onto something here.

 

[javo64]

I get what you're saying, but the thing is, I've been on the LA health insurance for over a year. Due to some unfortunate circumstances, my 3 yr. old and I had to move in with my mom, here, after I got pregnant with our 2nd child, while my husband stayed in FL until a few months ago. So we were being charged for LA insurance that whole time. Also, and you probably know this, the birth of #2 child didn't make the premium go up (or so they tell me, anyway).

BUT, I did finally get a call back from the head of human resources today - I was pretty surprised because she has not returned many calls in the past. Anyway, here's how she explained things (sort of): She said that they are "self-funded" and that the employee/employer split of the premium is not exactly 60/40, that it is actually more than that. She said it has "evolved" that way over the years with the costs of claims (which they pay themselves), administrative fees and a whole bunch of other stuff that I can't remember. She also agreed to speak with the "broker" that handles this for them and to get me a statement in writing to document the premium - I'm sure that means whatever they're doing is perfectly legal or they would never put it in writing. I'm definitely anxious to see if she actually comes through with that.

I also spoke with someone from Aetna who confirmed for me that the company is "self-funded". She said that the company just pays them a flat fee to administer and process everything, but that they have a fund they put money into from which all the claims are paid.

I guess this all makes sense to me (with my limited knowledge of the group health insurance game), but it also seems a little stange to me. It seems like, with this "self-funded" way of doing things, the company can just charge anything it wants as a premium. And it definitely does not make sense to me that, if they say they are paying 60% and you are paying 40%, they would not charge the employee enough to actually cover that 40%. Not that I wish they would have charged us more all along, but at least that way there would be some definite numbers to make sense of. This way, it seems arbitrary and subject to the whim of the company.

From what you said about the "community rated" state and every company in the "risk pool" affecting the cost of my company's insurance, it sounds to me like other companies are not necessarily self-funded. If a company is paying only it's own claims, then claims from others in the community shouldn't affect it, right?.... now I'm getting confused

Any other thoughts you have on all this craziness will be greatly appreciated!!!

By the way, I did ask what it would cost if we dropped my husband and just kept myself and the kids. In that case, the premium goes down to $582 - so we may just have to do that for a few months.

Thanks again, cbg.

 

[cbg]

I've always worked with small to midsized groups (under 250 employees) so my experience with self-funding is limited. I certainly couldn't sit down and explain it to you step by step. But what little I do know matching what your hr person told you, so I would tend to believe that what she told you is the truth. They can't charge just anything; it's formulaic (sp?). It isn't as arbitrary as it probably seems.

Community rating I CAN explain (and have done so numerous times). (BTW, if your company is even partially self-funded it's unlikely that community rating is part of the issue - a company small enough to fall under community rating laws would be foolish to self-fund.) Some states, mine included, have decided in their infinite wisdom that all companies with the same carrier with less than x employees (it's 50 in my state but it can be either less or more in other states) should be part of the same risk pool to even out the claims risk. So if you have only 4 employees, or only 24, or 44, you don't get hit with a huge increase because of that one hypothetical employee or dependent I mentioned in an earlier post.

Community rating is great if you're a small company with a high loss ratio. Community rating is terrible if you're a small company with a low loss ratio. The unfortunate company I mentioned that got a 1000% increase was in a community rated state - and in a risk pool that had a lot of high claims against it.

But as I said, a company would be foolish to self-fund if they are small enough to qualify for community rating. I wouldn't recommend self-funding for a company with less than 500 employees; or partial self-funding with an employee base of less than 250. The state I know of who has the highest employee base for community rating is one north of me, and it's 100.

But self-funding can definitely be the reason for the increase.

 

[javo64]

Well, I guess that's it then. My gut feeling, and what you're telling me is it's all on the up-and-up.

I'm glad to know they're not trying to cheat me, but it stinks to know that the premium is really that high!!!

We're just going to go with the option of continuing coverage for me and the children right now. Hopefully, my husband will be able to cover all of us with benefits from a new job in the next few months.

Thanks for spending the time to help me figure this thing out.

Take care