The health insurance exchanges opened last week, drawing a great deal of interest and some poor reviews. Unfortunately, heavy traffic caused functional difficulties for many.

Exchanges present new options for those eligible for COBRA benefits. However, the details remain unclear. For example, how will COBRA-eligible employees be informed of their exchange options? Who is responsible for telling them?

At this time very little guidance exists and employers are not technically required to change all of their COBRA notices.  Nevertheless, employers may want to alert the COBRA-eligible employees and former employees about factors to consider as they assess their coverage options.

Below is a quick recap of the facts and COBRA and the exchanges:

• Employers are still required to send standard COBRA notices and fines will be issued if employers are caught in non-compliance.
• Those who are eligible for COBRA may also consider the exchanges as a source of coverage. Although the exchanges may offer more affordable options than COBRA, employees should carefully compare plans, deductible levels, and subsidy eligibility. COBRA coverage may be more comprehensive.
• Those who enroll in COBRA most likely will not be allowed to change to an exchange plan until the exchange’s next open enrollment period, or until they exhaust their COBRA coverage.
• Conversely, those who elect coverage through an exchange cannot later change their minds and go back to COBRA. COBRA is only available during the COBRA election period which is still 60 days.
• People eligible for COBRA may not be eligible for subsidies. Encourage employees to consult with a tax professional on this issue.

A note about exchange notices:

Separate from COBRA, employers were required to provide exchange availability notices for all employees effective October 1. However no fines will be issued for employers caught in non-compliance on this issue.

In summary:

This is a very confusing time for employees who are becoming eligible for COBRA. If you’d like to proactively provide your people with additional guidance, consult with your attorney to determine if and how you can revise your COBRA notices or perhaps provide a supplementary notice. In our experience, a little extra communication usually pays dividends.

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