VOL. XIX, ISSUE 3
JUNE 2014
COBRA and ACA
Letter from Karen Knippen
Many of the day-to-day details resulting from
implementation of the Affordable Care Act (ACA) are
surfacing. Prior to ACA, employee benefits and health
insurance were already complicated by a number of
laws – both state and federal. Now, how all of these
interact is making things more complex.
I thought that once open enrollment passed that we
were on our way to having a solid grasp of the issues
surrounding implementation of the ACA. It seems
that we’re really only now finding out what we know
and – more importantly - what we don’t know!
This issue of Legislative Review addresses the
decisions and implications of them to be considered
when COBRA and ACA meet.
I’m reminded of a comment that I heard recently.
If you think of health reform as a ladder, we are
Individual Open Enrollment Period
Limitation
really on the lower rungs at this point in time. I
guess we’re all climbing this ladder together, one
rung at a time.
With the individual market’s limited open enrollment
period, individuals have more limited options regarding
when they can purchase individual coverage. Outside
of the annual open enrollment period at the end of
the year, coverage is available if one qualifies for a
Special Enrollment Period.
Karen Knippen, RHU, REBC, CLTC
Many of the special enrollment period events are those
already common to the group insurance market. These
would be marriage, birth of a child, adoptions and
similar events. There are also other exemptions and
special situations that allow coverage to be obtained
throughout the year.
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Sincerely yours,
continued on page 2
The information contained in this publication is intended for the general information of our clients. It should not be construed as legal
advice or legal opinion regarding any specific or factual situation.
The ability to obtain individual coverage during the
year takes on new importance considering the fact
that a person unable to obtain coverage may be faced
with a penalty for each month without coverage.
COBRA - Overview
COBRA has been the “law of the land” since 1985. It
provided a means for employees to keep their health
coverage when they might otherwise lose it.
Several events that can cause workers and their family
members to lose group health coverage may result in
the right to COBRA coverage. These include:
• Voluntary or involuntary termination of the
covered employee’s employment for reasons other
than gross misconduct
• Reduced hours of work for the covered employee
• Covered employee becoming entitled to Medicare
• Divorce or legal separation of a covered employee
• Death of a covered employee
• Loss of status as a dependent child under plan rules.
Employers subject to COBRA are required to provide a
variety of notices to employees about their rights and
upon the occurrence of a qualifying event.
ACA and COBRA
If an employee suffers a voluntary or involuntary job
loss, they still have the option to enroll in COBRA or
state continuation of coverage despite passage of the
ACA. However, the revised model notice for COBRA,
-2 legislative review
and guidance issued by federal regulators make it clear
that election of COBRA is but one option.
The new model notice is quite direct in what these
options are. Upon a loss of employer provided coverage
a person can elect either COBRA (or state continuation)
or they can apply for coverage in the exchange or
the broader individual market. In many cases, as the
notice states, coverage other than COBRA may be more
affordable. And, a person has the added possibility that
they could qualify for an exchange-based subsidy.
If applying for exchange coverage, it’s important to
apply as soon as the COBRA event occurs – or in
advance if a loss of coverage can be anticipated. A
person has 60 days from the loss of coverage to enroll
in the exchange. Equally important, COBRA coverage,
once elected, is effected without a break in coverage.
A person enrolling in the exchange may have a break
in coverage of more than one month depending upon
the date that they enroll. Typically, you must enroll in
the exchange before the 15th of the month in order to
have coverage effective by the first of the month.
Once a person has elected COBRA, they will not be
eligible for coverage in the exchange until the expiration
of the COBRA period or the individual market’s next
open enrollment period. Individuals who are uncertain
about which choice to make, or who fear they may
have expenses during a break in coverage may want
to apply for exchange coverage before they decline
COBRA; thereby keeping the COBRA option available
if needed.
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Considerations to Keeping COBRA
COBRA may be the wiser alternative in a variety of
situations. Chief among these would be situations
where an employer may offer payments to help cover
premiums. It is likely that employer severance agreements
that may have routinely offered COBRA-premium
assistance will become less common reflecting the
availability of exchange coverage with the possibility
of subsidies.
Other considerations that may make COBRA or state
continuation the better alternative include:
• Whether the beneficiary has already met the current
deductible or out-of–pocket limit
• A desire to retain access to a particular medical
provider that may not be participating in an
available exchange-based or individual plan
• A need to retain coverage to have access to a
particular prescription which may not be available
through other plans in the individual market
• Situations where state-continuation may offer
other options that are beneficial.
Special COBRA Election
The Centers for Medicare and Medicaid Services (CMS)
issued guidance on May 2, 2014 providing a special
enrollment period for individuals eligible for and
enrolled in COBRA. While the guidance affects only
those states with federal exchanges, the CMS guidance
encouraged state-based exchanges to follow their lead.
The guidance stated that HHS was concerned that
people had made COBRA decisions without fully
understanding the constraints that they would face
as a result of their decision. In particular, the notice
stated that employers may not have updated their
COBRA model notices to reflect the exchange option.
As a result of these concerns, HHS established a special
enrollment period based on “exceptional circumstances”
that would allow persons who had elected COBRA to
cancel COBRA coverage and enroll in the exchange.
Individuals wishing to utilize this special enrollment
period were given 60 days from the date of the bulletin
to change to an exchange plan. This extension,
therefore, is effective through July 1, 2014.
Anyone wishing to avail themselves of this special
enrollment period must contact the Marketplace call
center and activate the special enrollment option. The
exchange will assess their circumstances to determine
if a person is eligible for the extension.
It is unclear if everyone – including those individuals
who were provided clear and complete details about
their continuation options - can avail themselves of
this special enrollment period. Therefore, someone who
would like to revisit their COBRA enrollment decision
would be well-advised to contact the Marketplace to
see if they will be considered eligible for this extension.
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COBRA and ACA
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