COBRA CONUNDRUMS reprinted from the September, 2013 issue of Health Insurance Underwriter Magazine featuring our very own Robert Meyers.
Dear COBRA Bob,
I’ve been hearing a lot of rumors that COBRA will be going by the wayside in 2014 once the Affordable Care Act is underway. Is this true?
- Doubtful in Durham
Thank you so much for asking a question that is on many business owners’ minds. The short answer is “NO” – COBRA is not going by the wayside in 2014.
If you read through the thousands of pages of Affordable Care Act (ACA) regulations, you won’t find any mention of COBRA. That’s because COBRA is a separate law that predated the ACA, and ACA regulations do not modify the COBRA law in any way.
There are many people who would be happy to take COBRA administration off their TO DO lists. Those people contend that COBRA will no longer be necessary because affordable coverage is readily available to everyone through the new health exchanges. Furthermore, they say COBRA won’t be quite as important to maintain creditable coverage once carriers are not allowed to exclude coverage based on preexisting conditions. And, they also claim that if creditable coverage and benefit accessibility are no longer issues, there’s no need for employers to waste their time sending COBRA notices.
Let’s take a closer look at those arguments.
- Argument #1: Affordable coverage is readily available to everyone through the new health exchanges.
Closer Look: The intention is that coverage will be readily available to everyone through the exchanges. However, for now, the exchanges are for individuals buying coverage and employers with fewer than 100 employees. In many cases, COBRA will represent a more affordable option than coverage available through the exchanges – particularly if an individual has already met his or her deductible and out-of-pocket expense thresholds.
- Argument #2: Without preexisting condition exclusions, it’s no longer important to maintain creditable coverage.
Closer look: As we discussed last month, creditable coverage will remain an important issue until January 2015. Not all employer plans renew on January 1. The Affordable Care Act (ACA) eliminates preexisting condition limitations for health plans beginning on or after January 1, 2014. It also introduces taxation by providing subsidies to individuals with certain income levels if they choose to purchase through an exchange and cannot get group coverage through their employers. So far, there has not been much guidance on how employers will be required to report the months in which an individual had coverage in place. Therefore, employers should continue to provide certificates of creditable coverage throughout 2014 and be on the lookout for guidance on reporting coverage periods. This will prevent transitioning employees from encountering preexisting condition clauses on plans that transition mid-year and begin a process to track coverage periods for tax purposes.
- Argument #3: If benefit accessibility and creditable coverage are no longer issues, COBRA notices are no longer needed.
Closer look: We’ve already demonstrated the reasons why benefit accessibility and creditable coverage will continue to be important – at least in the short term. In addition, COBRA notices are important to keep qualified beneficiaries informed of their rights. And right now, amidst the confusion of ACA implementation, information is more crucial than ever before. In the June column, we reviewed the new Department of Labor (DOL) notices required beginning October 1, 2013. The notices are required to notify employees of coverage available to them when newly hired, or upon experiencing a COBRA event. The “Notice to Employees of Exchange Coverage Options” is an example of how COBRA administration can be used to aid with health reform communication.
Now that we’ve taken a closer look, you can see that COBRA continues to be a relevant tool in benefits administration and to protect the rights of plan participants. Only time will tell what the future holds for COBRA, but we can say for sure that COBRA will be alive and well in 2014 and beyond as long as there are group health plans sponsored by employers with 20 or more employees.
Do your best,