How PPACA will influence COBRA administration as we know it
In today’s economy, COBRA administration is more important than ever. A January 24 article from Gallup.com reports that the percentage of Americans lacking health insurance climbed to 17.1% in 2011. This is the highest percentage recorded since Gallup and Healthways began tracking in 2008.
What’s the future status of COBRA? Many insurance agents and employers believe that COBRA will cease to exist with health reform. I respectfully disagree. COBRA exists to help individuals make transitions and bridge coverage gaps. As long as transitions and gaps exist, so will COBRA.
While PPACA includes many new healthcare coverage requirements, it leaves the basic structure of employer-provided health coverage in place. Furthermore, the coverage available on an individual basis, even through insurance exchanges, is likely to be expensive and not as comprehensive as employer-provided group coverage.
The U.S. Department of Labor (DOL) confirmed this view in FAQs posted on its Web site last year, specifically noting that health reform law did not: eliminate or change COBRA rules; extend COBRA time periods; or extend the premium subsidy law. More information on the implications of reform on COBRA administration can be found in "Mandated Health Benefits — The COBRA Guide," published by Thompson Publishing Group.
COBRA administration is here to stay, but it will most likely evolve to meet employers’ and employees’ changing needs. Here are a few changes we may see:
- Certificate of Creditable Coverage could be eliminated. In the world of preexisting conditions, Certificates of Creditable Coverage are essential to health insurance underwriting. Every insurance underwriter wants to know WHAT he or she is insuring before issuing a policy. This is easy if the individual was previously insured because a documented health history is easily accessible. Not so for those without insurance. In the past, anyone with a coverage gap of 63 days or more was subject to preexisting condition exclusion. In the world of health reform, preexisting conditions will eventually go away and along with it Certificates of Creditable Coverage may also go by the wayside.
- COBRA compliance rules may become highly segmented and situational. Before 2009, COBRA administration was uniform in nature. Then came ARRA. For the first time ever, ARRA caused COBRA administration to become highly customized and situational. For example, the March 2010 Temporary Extension Act linked two employment events – reduction in hours and termination. So, to administer COBRA benefits properly, employers not only need to know if an employee was terminated, they also need to know if the employee had a reduction in hours prior to the termination. Believe it or not, many employers don’t have a way of linking these two events in their human resource systems. Going forward, we’ll see more of these types of rules impacting COBRA status and COBRA administration.
- Employers will need more sophisticated systems for COBRA administration tracking and monitoring. Under the new legislation, employers must comply with a variety of notice requirements and must provide health exchange vouchers to employees who meet certain criteria. Effective 2014, many employers will face automatic enrollment requirements and penalties for noncompliance.
Future COBRA status: Which groups will be using COBRA in the coming decade?
The Gallup article says that young adults are now in better shape due to healthcare reform. U.S. adults aged 18 to 25 - who are now allowed to stay on their parents' plans until age 26 because of a provision of the 2010 healthcare law - are less likely to be uninsured than in previous years. The young adult group is the only group Gallup tracks that has seen a significant decline in the percentage uninsured in 2011. They are also a group that is likely to increase COBRA usage – particularly since many of their parents will help them afford COBRA premiums.
More than 30% of low-income Americans were uninsured in 2011 - a figure that has been rising since 2008, when it was 26.4%. Unemployed low-income Americans could take advantage of COBRA but cannot afford the premiums.
High-income Americans and seniors are the two groups that are the least likely to be uninsured, and the least likely to use COBRA administration services.