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What Happens to COBRA Under Obamacare?

Amidst the hullabaloo over the Affordable Care Act, aka Obamacare, and the federal government shutdown, one question that hasn’t been discussed much is:

 

What happens to COBRA?

 

The short answer is it’s not going away.

 

COBRA, of course, is the notoriously expensive government program that allows laid-off workers to maintain their employer-provided coverage for up to 18 months. For some, especially those with pre-existing conditions, it’s the only way to get healthcare coverage, but they have to pay the entire cost of the insurance plus an administrative fee.

 

Obamacare’s health care exchanges will provide a second option for these workers that should be significantly less expensive, especially for those who are eligible for higher subsidies. This should result in a lower percentage of laid-off workers choosing COBRA.

 

However, as Kaiser Health News reported (http://www.kaiserhealthnews.org/features/insuring-your-health/2013/091713-michelle-andrews-cobra-and-health-exchanges.aspx), there are logical reasons why some people might choose COBRA despite higher premiums. One is to maintain access to a particular network of providers. Another is because they have met or are close to meeting the deductible on their employer plan.

 

It’s important for workers to make an educated decision between COBRA and an exchange plan, for it’s not always possible to switch. If workers enroll in COBRA, they won’t be permitted to move to an exchange plan until the exchange’s next annual enrollment period unless they exhaust their COBRA coverage, Kaiser Health News reported.

 

What does this mean for employers?

 

Large corporations that pay their own medical claims could save billions of dollars in expenses due to laid-off workers switching from COBRA to Obamacare, according to a combined report from Kaiser Health News and the Chicago Tribune (http://www.kaiserhealthnews.org/stories/2013/september/24/obamacare-cobra-businesses-marketplaces-exchanges.aspx). The reason is that, due to COBRA’s high expense (more than $5,000 per year for single-person coverage and more for families), only people who know they are likely to use the insurance are likely to sign up. The more of these people who sign up for Obamacare, the fewer claims these corporations have to pay.

 

Clearly, for these employers, providing education about COBRA makes a great deal of financial sense. But it’s also a good idea for other employers to educate workers about COBRA and Obamacare. Many workers find choosing health insurance plans difficult—that’s one of the reasons 89 percent (http://www.shrm.org/hrdisciplines/benefits/articles/pages/perplexed-benefits-choices.aspx) choose the same options every year. Employees are appreciative when their employers provide information that helps them make better benefits decisions—both during and after their employment. For companies, doing so is one more way of being a good employer, and increasing worker loyalty.

 

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