COBRA CONUNDRUMS reprinted from the December, 2013 issue of Health Insurance Underwriter Magazine featuring our very own Robert Meyers.
Dear COBRA Bob,
My clients are inundating me with questions about the future of COBRA. They seem to think that if coverage through the Marketplace is more affordable, COBRA will fall by the wayside. Your thoughts?
- Not Sure What to Believe in Bellevue
Dear Not Sure,
In September, as everyone eagerly awaited the launch of the Marketplace websites, there was quite a bit of chatter in the press regarding the future of COBRA. Many were concerned that COBRA-eligible people may not understand that they could also access coverage through the Marketplace, and that coverage could be more affordable than the single option available through COBRA.
However, now that we’re a few months into the Affordable Care Act (ACA) open enrollment, it’s clear that the choice between Marketplace coverage and COBRA coverage is anything but clear cut. A lot depends on where you live and how many carriers offer plans in your state. In some states, consumers have been disappointed to see that the options available through the state Marketplace are less comprehensive and much more expensive than the employer-sponsored option. For example, in my state, our group health rates went up 7 percent but my rate for comparable coverage in the Marketplace is 50 percent higher with a much higher $12,000 deductible!
With this in mind, COBRA may continue to be the best option for many people, particularly when deductibles are considered. For example, let’s assume an employee has a $3,000 deductible under an employer-sponsored plan and had spent $1,800 toward satisfying the deductible at the time of his COBRA-qualifying event. If the employee elects the COBRA plan, he keeps the same deductible and the $1,800 accrued toward satisfying the deductible. However, if the individual chooses a new policy through the Marketplace, his deductible changes and the accrual starts over. So, even if the COBRA premium costs a little more each month, many individuals may find it preferable to stick with their existing plans under COBRA – particularly if the new Marketplace plan deductible is $12,000!
Beyond personal preferences, there are a few other reasons COBRA is here to stay for now and into the foreseeable future.
1. COBRA encompasses more than just medical plans. In 1996, dental plans were added, and in 2001 the qualifying plan definition was expanded to “health care,” which covers diagnosis, treatment and cures. These types of plans are not available through the Marketplaces (yet), and so employees will continue to rely on COBRA to bridge these other types of coverage gaps.
2. The issue of creditable coverage continues. Preexisting condition limitations will still be of concern until January 1, 2015, when all employers’ plans have finally transitioned to ACA-compliant plans. Therefore, to prevent transitioning employees from encountering preexisting condition clauses on plans that transition mid-year, employers must continue to provide certificates of credible coverage throughout 2014.
3. Notification duties remain – for group plans and SHOP plans. Regardless of where employers get coverage (either through group health plans or through SHOP exchanges) their COBRA notification duties continue, and they are subject to fines for non-compliance.
Interestingly, the Marketplace election period and the COBRA election period are both 60 days – but the start dates are different. The Marketplace 60-day period begins the day of the qualifying event. The COBRA 60-day period begins the day the employer sends the election notice.
How could this small discrepancy create more late-term COBRA elections?
Consider this scenario: An individual procrastinates on making a coverage decision. On the 65th day, he herniates a disc in his back and needs extensive treatment. He realizes that he is no longer eligible for the Marketplace, so he rushes to elect COBRA before the election period expires. Suddenly, it’s very important to know the date the COBRA election notice was sent.
As you can see in this scenario, proactive and well-documented communication will be more essential than ever, as many COBRA-eligible individuals will take longer to make elections as they investigate options available through the Marketplace. It’s crucial that employers keep airtight documentation of their notification practices and dates in case discrepancies arise.
While COBRA may feel like an inconvenience, it is still an important benefit for American workers. And in this season of giving, it’s important to remember that COBRA was created in the spirit of helping others. I still wholeheartedly believe in the value of COBRA. Do you believe?
Do your best,