Question

Ace worked at Ventura Company for 18 years. He was terminated after taking his pet to work. Ventura provided health insurance. The premium for the group is 1,000 per month. Ace would like to continue the health care coverage under COBRA. Ventura could charge him as much as1,020 per month. What is the monthly premium for Ace if he chooses to continue the health care coverage under COBRA?

1) 1,000
2) 1,020
3) 980
4) 1,050

Answer 1

Ace's monthly premium under COBRA would be $1,020 per month, as it includes the original $1,000 premium plus the maximum 2% administrative fee allowed by law.

Step-by-step explanation:

The student's question concerns the continuation of healthcare coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) after termination. Under COBRA, a former employee may continue to receive their group health coverage by paying the premium themselves, with the former employer allowed to charge up to a 2% administrative fee in addition to the premium. In Ace's case, the monthly premium was $1,000 while he was employed at Ventura Company. If Ventura Company decides to charge the maximum allowable amount, Ace could be charged an extra 2%, which comes out to $20 (2% of $1,000). Therefore, the monthly premium for Ace under COBRA would be $1,020 per month.