Cobra premiums --- help!

I have an employee who has termed, has been sent the Cobra packet and is accepting the Cobra. I have a plan administrator who handles my Cobra but frankly I believe they are more confused than myself. The employee termed mid-month, we term their insurance immediately as our employees pay their insurance in arrears. I believe the administrator should have provided this ex-employee with a pro-rated amount of Cobra due as well as the normal monthly premium. The administrator advised me yesterday that they assume that we collect an entire month amount prior to the employee leaving and leave them on the policy until the end of the month. What are you thoughts about this and is this how many of you handle termination and insurance.

We are a trucking company and by law the life insurance portion must end the day they are terminated per our contract. This has been what has happend with all other insurances prior to my arriving here. I also know that if we terminate an employee prior to 15th we receive a partial refund for the month from our Health Insurance.

Can any of you shed some light on the pro-rating of Cobra premiums. This employee resigned so they do not fall into the Cobra Stimulus.

Thanks for your help!


  • 6 Comments sorted by Votes Date Added
  • I am a little confused (so what else is new) as to why he would have premium due if you bill to the arrears.
    Anyway, we operate as your administrator indicates. .we pay a month in advance. .regardless of whether the employee leaves the second or 30th of the month, they are covered thru the month.

    If b/c of their term date, they have already paid part of the next month it is reversed/refunded on their final check.
  • Sorry for the confusion Sonny.. if the employees insurance is effective the 1st of March, they do not start their premium payments until their 1st payroll period in March instead of starting to collect their payment in February. Our waiting period for insurance is 1st of the month following 30 days of employment. So this employee would have only paid for 1 bi-weekly premium payment instead of two to cover the monthly premium.

    The amount they pay is very small compared to the entire premium. Employee contribution for a family plan is $122 bi-weekly but the monthly premium is $1634. I guess this is why the questions as to who is going to pay the remainder of the monthly premium as the CFO thinks it should be the terming employee.

    Not sure if this is helpful or just more confusing
  • We are also a trucking company. Our company paid life insurance and disability end as of the date of termination so the premium is pro-rated and we receive refunds from the insurance company. All other insurance coverages end as of the last day of the month following termination. Our employees pay their portion of the premiums in advance.

    Our insurance agent advises at renewal we can have the contracts changed so all coverages end on the terminate date. Personally, I like it just the way it is. That way we don't have to mess with pro-rating refunds.
  • Several years ago I worked for a TPA. We had a client who termed health insurance at the end of the last shift worked (it went until midnight if the participant elected COBRA.) If an employee was termed on one day, COBRA started the next day, and each month's premiums was good for a month. So, for example, if an employee was termed on the 13th, their COBRA month ran from the 14th through the 13th. A person termed on 04/13/09 would have coverage through 10/13/10 (18 months.)

    For easier administration, and with permission of the participant, we pro-rated the first month and then they paid on the 1st for a month's coverage. They were always informed their COBRA would term mid-month after 18 months though. We never had a participant turn us down for the easier participation method, and we never had a participant stay on COBRA for 18 months. I don't know what would have been done if the participant had fought the issue.

    Good luck!

  • We have a self-insured health plan. Our employee's health insurance ENDS on the last day worked. Because we, the company, actually pay for any claims, we do not want to pay for claims of terminated employees incurred after they no longer work for us UNLESS they elect Cobra.

    In our Contract with Anthem BCBS it is written that the last day covered is their last day worked. So once terminated they do not have any coverage past midnight of that day. It they want further coverage, they can elect COBRA and pay the premium.

    Our Cobra Administrator knows their coverage ends on the last day, they are sent a pro-rated amount for the remainder of the month and from then on pay monthly for their coverage. Their Cobra ending date will still be 18 months after their termination date, so if they quit on the 10th their 18 months ends on the 9th, etc.

    You really need to check your contract with your health insurance company regarding terminations.

    When we figure out how much the employee owes on their last paycheck, we take the monthly amount (their portion) due divided by the number of days in the month times the number of days worked. If they have already paid too much they get a refund on their check, if they haven't paid enough then extra is taken out.
  • I think you and your COBRA administrator need to get on the same page. If you insurance company requires that you term the employee as of the date of their termination, your COBRA administrator needs to know that so they can process the paperwork and bill accordingly.

    In a past life a termed employee remained on the insurance through the end of the month and they were paid bi-weekly. When we processed their payroll we made sure we were getting the proper premiums for the month. For example, if an EE termed on the 2nd of the month, we would double deduct the premiums from the 1st payroll check of the month to ensure we received our premiums for the month. If they were terming later, we simply deducted the normal premium from the 2nd payroll for the month. COBRA always began the 1st of the month following termination of employment.

    Where I currently am, our insurance runs the same as yours as they pay as they go and are terminated the day following the last day of employment. We notify the COBRA administrator of the date of their termination and they know they are then terminated the following day. When they send out the COBRA paperwork it shows the appropriate days and the premium amounts for COBRA are for 30 days from the 1st date of coverage. There aren't any prorated amounts.

    Does this help??
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