COBRA & ACA

Column 7:  COBRA & ACA

I am currently under COBRA coverage from my prior employer.  How will the new law affect me?  I heard that COBRA is now unnecessary.

COBRA refers to your right and option to continue coverage from a prior employer.  You are required to be treated like any other "similarly situated active employee" and can continue coverage for up to 36 months if your employer is domiciled in California.  You will pay up to 102% of the employer's premium if the group has greater than 20 employees and 110% if there are less than 20 employees. 

If the employer is not domiciled in CA then the benefits extension for a terminated employee is only 18 months.   When you receive the COBRA notice you will be advised of the type of qualifying event and the beginning and ending dates of coverage. 

The employer is required to provide this notice no later than 44 days after the qualifying event, so be sure to keep an eye out for the notice so you do not miss your opportunity.

Starting in 2014 all individual plans will be "guaranteed issue" and depending on your income may be subsidized, resulting in lower premiums.  However it's important to consider the following items before you let your COBRA coverage go.

1)      Are your deductibles already met?  How about coinsurance, have you reached your maximum out of pocket levels yet?

2)      Is the network on the Exchange product adequate?  We expect the provider networks to be smaller in the Exchange.  In fact there will be some products that use an EPO (Exclusive Provider Organization).  That means that if you see an out of network provider you will receive NO benefits.  So your COBRA plan may have a broader network.  Be sure to review those.

3)      Exchanges will not be consistent across state lines.  While the products will be similar, rates and benefits will not be exactly the same. 

It is important to understand that while coverage will now be guaranteed to be issued, all benefits will not be the same.  The subsidy that may be available to you based on your income could be a very big factor, particularly if you have lost a job and now have a lower income.  But remember that the numbers are reconciled at the end of the year on your tax return, so if your income picks up you could be required to repay a portion of the subsidy.

What is a certificate of creditable coverage and will it still be important?

This document must be provided to you following termination of health insurance coverage.  Its current value is to prove that you have had continuous coverage.  Health plans can limit benefits for pre-existing conditions if you have had a no coverage for more than 63 days.  So it is important to keep these certificates to prove you have had continuous coverage.

I expect they will continue to be important tools to document coverage.  The initial open enrollment period for the Exchange will be 10/1/2013 through 3/31/2014.  But in 2015 there will only be an annual open enrollment period from October through December to obtain coverage, unless you have a qualifying event.  Those events will likely be something like losing employer sponsored coverage, moving out of a plan's service area and the like.  While we have not been trained on all the administrative details, I expect this documentation to be important so if you have these certificates, keep them in a safe place.

Why is COBRA coverage so expensive?

The premium calculation for COBRA is based on the actual premium your employer is currently paying.  As stated earlier it can be 102-110% of the billed premium.  Former employees are often surprised to learn how much their employer was actually paying for health insurance premiums.  In addition, those premiums are not considered taxable income to you when you are working, so the value is even greater than the dollar amount. 

Note if you want to impress your friends in a trivia game, you can tell them that COBRA stands for the  Consolidated Omnibus Budget Reconciliation Act.

Note: All information in this column is provided" to the best of my knowledge" subject to final regulation by the respective agencies.