Some benefit professionals thought they might get to paradise when the ACA's individual marketplaces were seen as a possible replacement for COBRA. Instead, we're facing a landscape where the complexity of COBRA remains a part of every employer's benefits program while the ACA gets a makeover from the Republican White House.
So what does this mean for employee benefit programs? Most likely, it just means that the majority of employers will continue to outsource COBRA administration. It also could mean eligible employees go back to just having COBRA as their only choice for "transitional" coverage. But even if the option remains to enroll in Obamacare plans, COBRA could still win as the most attractive option for employees who qualify.*
Let me introduce you to my hypothetical friend Joe and his hypothetical situation to explain.
Joe was working full time for a large retailer, but his hours were recently cut back to part time. At this point, he no longer qualifies for the company's medical plan. His employer took the 30 days allowed to notify the insurance company of Joe's status change, and the insurance company just met the deadline to notify Joe of his eligibility for COBRA coverage, which was almost two weeks later. Joe then has 60 days to decide whether he wants to enroll in the plan.
Joe's coverage didn't terminate until the insurance company was notified, but that two-week gap between cancellation and notifying Joe of his options is what's important. You see, Joe is on the verge of having shoulder surgery. His doctor told him to keep taking shots and physical therapy for the pain until it's too great that he's not able to bear it anymore. Joe has the option to get a plan from the individual marketplace, but premiums are $500 or more a month and deductibles range from $3,000 to $6,000. Even worse, the specialist Joe has been seeing isn't in network for the Obamacare plan, so he would have to pay out of pocket if he were to continue with the same doctor.
Luckily, COBRA, though potentially more expensive, enables him to keep his doctor and will pay retroactively for claims that were incurred during that two-week gap. At the point Joe enrolls in COBRA, he no longer qualifies for any special enrollment period with Obamacare. He has to wait until the next open enrollment, which is fine since COBRA can last up to 18 months.
Another reason we could see employees opting for COBRA in the future is the proposed expansion of HSAs under President Trump's administration. This includes increasing HSA contributions to match the combined amount of a participant's annual deductible and out-of-pocket maximums as well as extending HSA eligibility to any insurance plan vs. restricting to only HDHP participants. So going back to Frank's situation, he would be better off with COBRA, considering the average deductibles for employer-sponsored coverage are considerably less than the plans in the individual marketplace mentioned previously. Not to mention, he's already been paying toward his deductible with frequent visits to the doctor.
What does this mean for you as a benefits administrator? COBRA administration isn't going anywhere and the activity you see could rise. Whether you're among the majority of employers that outsource COBRA administration or daring enough to take on the complexity in house, a solution that is tightly integrated with your benefits management platform can save you from manually updating data across multiple systems, which can put you at risk of costly errors and wasted time.
Find out if you're benefits platform is prepared to handle emerging industry trends. Download your free copy of the 2017 Buyer's Guide to Effective Benefits Management Technology and see what you might be missing.
*Voluntary or involuntary termination for reasons other than gross misconduct as well as reduction in number of hours of employment qualify employees for COBRA coverage. Spouses and dependents can qualify under specific circumstances. See Department of Labor's FAQs on COBRA Continuation Health Coverage.