§1164 Applicable Premium

Summary

Explains how to figure the “applicable premium,” which is the cost the health plan would pay for continuation coverage for people in the same situation who did not have a qualifying event. For most plans, the applicable premium is that plan cost for similarly situated people, whether the employer or the employee normally pays it. If the plan is self‑insured, the premium must either be a reasonable actuarial estimate that uses factors the Secretary sets, or the plan administrator can choose to base it on the plan’s actual cost for the same period in the preceding determination period adjusted by the change in the implicit price deflator of the gross national product (calculated by the Department of Commerce and published in the Survey of Current Business) for the 12‑month period ending on the last day of the sixth month of that preceding determination period. The administrator cannot choose the past‑cost method if there was a significant change in coverage or in the employees covered between the two periods. The applicable premium is set for a 12‑month determination period and must be decided before that period starts.