11 Oct COBRA – Post PPACA

Originally posted October 11, 2013 by Linda Rowings on analytics.ubabenefits.com

With the advent of the health marketplaces, why do we still have COBRA?

The framers of PPACA decided that COBRA should be available even after the health marketplaces become available primarily to avoid possible disruptions in care.  They felt that COBRA beneficiaries, many of whom have significant health conditions, should be allowed to stay with their current health care providers if they chose to.  With reports of narrow networks in some of the marketplaces, this concern has some basis.

The marketplaces will not offer ancillary benefits, so some individuals will elect COBRA to have access to continued dental or vision coverage.  Individuals anticipating a short period before new group coverage becomes effective also may choose to elect COBRA as a simpler bridge than moving into and out of the marketplace.

However, most experts believe that most COBRA-eligible individuals will decline COBRA and elect coverage through the marketplace instead.  Due to the premium subsidies, marketplace coverage may be less expensive than COBRA; it also does not have a maximum coverage period like COBRA does.  As COBRA beneficiaries tend to have claims that exceed premiums, employers will benefit from a migration of this population to marketplace coverage.

It appears that the marketplaces will basically follow the HIPAA special enrolment rules.  This means that if a person elects COBRA they will need to complete the maximum COBRA period in order to enroll in the marketplace outside of open enrollment.

Employers will need to provide the general COBRA notice to newly eligible individuals even after January 1, 2014.  The Department of Labor has provided an updated model COBRA election notice (at COBRA Continuation Coverage) that mentions the marketplace that will need to be given following a qualifying event.  It is unclear when employers must switch to the new notice; since the marketplace coverage will not begin until January 2014 to avoid confusion waiting to move to the new notice until this December may be the best option.