A lot has happened over the past few years. The Affordable Care Act, or ACA, has transformed the way millions of people obtain health insurance coverage for themselves and their families. But it’s a complicated law, with a lot of moving parts. Many consumers, workers and human resources professionals/employers are confused about whe
re their role in covering workers ends and the ACA begins. This is particularly true in instances where a worker has left the job and is no longer eligible for coverage under the employee group plan. Here are answers to some of the most frequently asked questions:
What is COBRA?
The term “COBRA” comes from the name of a federal law called the Consolidated Omnibus Budget Reconciliation Act. The law had many provisions – but one of the most important was that it obligated employers to provide an option for qualifying former employees who left their jobs, or who were affected by change in a family member’s eligibility, to continue their workplace coverage by paying the combined employer/employee premium, plus some administrative overhead costs.
Is COBRA Still in Effect?
Absolutely, COBRA has not gone away. Employers are still obligated to provide continuation coverage to qualifying workers who have left service with the company or have lost their eligibility to participate in the company health care plan. The law also may apply where a family member lost his or her eligibility to participate due to a divorce, or death, for example.
It is possible that many people who may qualify for COBRA coverage will instead elect to purchase health insurance on the market via an agent or one of the online exchanges. This is a much more viable option than it used to be, since the Affordable Care Act requires carriers to accept all applicants without discriminating against those with pre-existing conditions. Prior to the ACA, this was a major consideration for those with health problems because they may have had difficulty purchasing their own coverage. However, some may choose to stay on with the employer plan via COBRA, and employers are still obligated to offer continuation coverage, just as they were prior to the ACA.
How Long is the COBRA Continuation Requirement?
The employer is required to offer employees continued coverage for up to 18 months after the worker leaves the employers’ service. The employer does not have to continue paying the premium, however. That becomes the responsibility of the covered individual or family.
The requirement to provide notice of COBRA eligibility has not changed. Employers still have the same obligation to provide notice of eligibility as they did prior to the ACA. This includes poster requirements, as well.
Issues for Employees
For employees who leave the service of their employer, or for workers or family members who otherwise lose eligibility for their group health plan, there are some important factors to consider before electing to take COBRA coverage, rather than pursue private coverage in the open market or via the exchanges.
Do you qualify for a subsidy under the Affordable Care Act? If your income is relatively low, you may qualify for a special tax credit designed to make qualifying health care coverage in the open market or via the exchanges.
If your income is low enough to warrant a subsidy, you may be better off declining your COBRA coverage and purchasing a subsidized health care plan via the exchanges. If your income does not qualify you for a subsidy, you must look at the costs and benefits of the plans available to you on the private market.
If you liked your employer plan, and you can absorb the premiums, you may consider staying with that plan. However, you will have to give it up after 18 months.
When COBRA Ends
When your 18-month COBRA extension period ends, you again have the choice to purchase private health insurance for yourself and your family. You can purchase such a plan even if COBRA has expired outside of the open enrollment period for the Affordable Care Act. However, if you want to switch your plans early, before the 18-month COBRA period expires, you must do so during the ACA open enrollment period.