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Calculating COBRA Premium When You Offer an HRA

Calculating COBRA Premium When You Offer an HRA

2 minute read

Do you offer your employees a Health Reimbursement Arrangement (HRA) that integrates with their health plan? If yes, you are required to offer COBRA continuation of coverage for the HRA as well as the medical plan.  In the event you need to offer COBRA, due to an employee’s termination or qualifying event, you will need to include a premium amount for the HRA on your COBRA election form. The formula for calculating the HRA premium differs depending if you offer an unfunded or funded HRA.

 Unfunded HRA

With an unfunded HRA, you make funds available to your employees. The funds can be used when they incur eligible medical expenses. Unused funds can be recouped at the end of the plan year.

To calculate the COBRA premium of an unfunded HRA, first determine the utilization percentage of the plan in the past 12 months. Divide the total amount of funds that were used in the past 12 months by the total amount available. A good rule of thumb is to set the utilization at 75% if your unfunded HRA plan is in its first year.

Next, multiply the utilization percentage by the total HRA funds available to each individual employee. This is the COBRA premium amount if the employee would like to maintain access to their unfunded HRA.

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Funded HRA

With a funded HRA, you deposit funds into an employee-controlled account which rolls over from year to year, gaining interest.

The COBRA premium for a fully funded HRA is 100% of your contribution. If an employee has a balance in their funded HRA account, and they choose COBRA continuation of their HRA, they must use all funds in the account prior to termination of COBRA.

For those clients with a funded HRA with National Insurance Services, you can offer your employees “HRA Coverage in lieu of COBRA”. Employees will not pay a premium, but they will maintain their ability to spend down their account to $0 even after the COBRA period has ended.

For more information about calculating COBRA premium with your HRA plan, download the guide.


1 Mosby's Medical Dictionary, 8th edition. S.v. "medical care." Retrieved December 20 2017 from https://medical-dictionary.thefreedictionary.com/medical+care

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Erik Kass

Erik Kass

Erik Kass has been in your shoes. After working 14 years in Finance and Human Resources for school districts in Wisconsin, Erik was named the 2016 Wisconsin School Business Manager of the Year (WASBO). Now an Employee Benefits Consultant for National Insurance Services (NIS), his extensive knowledge and experience is his greatest asset to his customers. “Because I’ve been there, I have a deep understanding of the relationship between quality employee benefits and the limited resources public entities face.” Erik has a Master’s in Education with an emphasis on School Business Management, is ACA certified and is a licensed Health and Life insurance agent. As an Employee Benefits Consultant, he works with schools, cities and counties in Wisconsin and Illinois. Erik is also a member of WASBO (WI Association of School Business Officials), WASB (WI Association of School Boards), WASDA (WI Association of School District Administrators) and National Association of Health Underwriters (NAHU).