One of the big questions many employees have about the new Affordable Care Act is what will happen to the COBRA program once the new law takes effect in January 2014. COBRA, which is short for the Consolidated Omnibus Budget Reconciliation Act, allows workers and their families to continue their group benefits for limited periods of time after leaving their employer or getting their hours cut.
In general, COBRA benefits are required by employer-sponsored health plans that are offered to employees in companies with 20 or more full-time workers. However, once an employee leaves the company and elects COBRA benefits, he or she is responsible for paying the entire premium, including the amount that was paid by the employer. In addition, the employee may also have to pay up to two percent in administration fees to continue the policy.
Reasons For Cobra’s ExistenceOne of the reasons COBRA was put into place was to protect employees from falling into a pre-existing condition clause that would prevent them from getting other insurance, either with a new company or as an individual. Since insurance companies could deny coverage to consumers who had pre-existing conditions if their coverage lapsed for a significant amount of time, the law was put in place to give consumers the option of keeping their benefits, but they would have to pay the entire premium to get the extension.
Now that insurance companies can no longer deny coverage to people who have pre-existing conditions under the Obamacare, COBRA may seem obsolete. While the possibility exists that COBRA could eventually be phased out, it will remain in effect at least for 2014. So the question then becomes whether or not taking COBRA is a better choice than purchasing a new policy through the insurance exchanges after federal subsidies are applied.
Under Obamacare COBRA Will Still Cost More
In most cases, under the Obamacare COBRA coverage will be more expensive than a new individual policy through the health insurance exchanges. This is because if a COBRA policy is continued, the employee has to pay both his share of the premium and the employer’s contribution. If the policy is rich with benefits and the employer has been paying a significant portion of the premium, chances are the full premium will be beyond the financial means of many people.
Rather than take COBRA, Affordable Care Act provisions allow low-income individuals to get coverage at a lower cost because of their potential eligibility for federal subsidies. These subsidies are designed for people who earn between 133 percent and 400 percent of the Federal Poverty Line, or about $94,200 for a family of four or $45,960 for an individual. If an employee’s income for 2014 is under these limits, it will probably be more cost effective to purchase a new policy and receive the subsidies to help pay the premium.
However, it is possible the coverage received through an exchange plan may not be as rich as one received through an employer. In this case, the employer will need to compare the benefits available in both plans to determine which plan is better for his or her situation. The nice part about choosing a plan on the exchange is the ability to choose from many different benefit levels to make sure the applicant gets the right amount of coverage for his or her needs.
Insurers Worried Ex-COBRA Members Will Skew Enrollment Numbers
Although ex-employees might discover they can pay less for insurance through exchanges than through COBRA, Affordable Care Act regulations requiring insurance companies to accept all applicants regardless of health status have insurers worried. They fear that ex-COBRA members will be sicker than average, causing enrollment numbers to skew toward members with increased medical costs. If there aren’t enough healthy enrollees to balance these members out, premiums could rise in 2015.
People who choose to retire early, though, may also be rejoicing about the new Affordable Care Act rules because they will no longer be required to choose COBRA if they have pre-existing conditions to get them through to the age at which they are eligible for Medicare. They can now research their options on the state and federal exchanges to find coverage that meets their needs the best.