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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

National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

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Ken Zastrow

Ken Zastrow

Ken Zastrow enjoys establishing a strong rapport with his clients. He believes that education is key in helping them understand their benefit plans. Ken has a strong background in underwriting and post-employment benefits. As Employee Benefits Consultant at National Insurance Services, Ken is responsible for the overall assessment and management of all an employer’s benefit plans including claim reconciliation, policy changes, renewals, and medical and dental analytics. He is also well versed in compliance, benefit integration, and early retiree benefits. Ken is a licensed insurance agent (Health, Life, Series 6 and Series 63) as well as a registered financial representative with GWN Securities. He works with schools, cities, and counties in Wisconsin.