The ACA’s impact on COBRA
September 4, 2014
As one of Michigan’s largest COBRA administrators, we get asked fairly regularly about what impact the Affordable Care Act has on COBRA, if companies still must follow COBRA regulations, and other questions along that line. The short answer: companies with 20 of more employees in the previous calendar year are still required to follow the regulations of COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1985.
These requirements include, but are not limited to providing all eligible employees with the Initial Letter, the offer to continue group coverage following certain work or life events including any event that results in a reduction in hours that leads to a loss of coverage (termination, reduction in hours worked, divorce and one of the more common events that is often missed by employers – the aging out of dependent child status), monitoring the timelines, and collecting premiums, etc.
Simply put, the Affordable Care Act provides qualified beneficiaries with another option for coverage via the Exchange/Marketplace, but it does nothing to defer or eliminate employer responsibilities under COBRA. Similar to being able to “buy-back” into the employer plan, purchasing coverage via the Exchange can be done during special enrollment periods. During the “special enrollment” an individual losing their employer-provided health plan may elect an Exchange/Marketplace plan either 60 days before or 60 days after the loss of coverage date. Individual Exchange/Marketplace coverage will offer all essential health benefits and health insurers cannot deny coverage based on pre-existing conditions. In addition, qualified beneficiaries with income between 100% and 400% of the federal poverty level may be eligible for subsidies to help offset the cost of premiums.
Subsidies may make Exchange/Marketplace coverage less expensive for some qualified beneficiaries, and unlike COBRA, there is no set time limit to coverage purchased here. However, that does not mean that Exchange/Marketplace coverage is right in all circumstances. Any Exchange/Marketplace coverage purchased will have a future effective date, whereas, COBRA coverage can be retroactive and therefore provide important coverage to fill in any gaps (time without coverage) for qualified beneficiaries. Additionally, if a qualified beneficiary has already met their deductible and/or co-insurance limits (out-of-pocket requirements) they may be better off electing COBRA for the remainder of the year until their deductibles, etc. reset. Last, there may be differences in the provider network that make the continuation of coverage via COBRA more attractive. A couple of examples here include the ability to maintain a patient-physician relationship through a pregnancy, for the treatment of cancer or any other serious illness.
Last, but not least, and maybe fundamental to the original question of whether or not an employer needs to continue to follow COBRA requirements, COBRA was passed into law in 1985 and until it is not a law, it is a law… Meaning that until Congress votes to repeal the COBRA law, employers must continue to follow COBRA regulations. We doubt that happens anytime in the near future.
If you have any questions about the ACA’s impact on COBRA, COBRA rules in general or if you have a customer that needs help administering their company’s COBRA requirements, call SBAM at (800) 362-5461 or visit us at www.sbam.org/cobra.