By promising to extend health insurance coverage to all Americans, the Affordable Care Act has eliminated employers’ need to offer COBRA continuation coverage. Or has it?
The Patient Protection and Affordable Care Act (PPACA) did not eliminate COBRA or change the COBRA rules. In fact, the notice health plans subject to COBRA must provide to new enrollees specifically mentions the Health Insurance Marketplace created by the Affordable Care Act.
COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1986, allows workers and family members who would otherwise lose their health insurance benefits to temporarily continue health coverage at group rates. If you had 20 or more employees during the previous calendar year, COBRA applies to your health plans. Be sure to count part-time employees, with each part-timer counting as a fraction of a full-time employee according the portion of full-time-equivalent hours they worked.
If COBRA applies, here’s what you need to know:
1 It affects any group plan that covers “medical care,” regardless of whether it provides coverage through an insurance company, a health maintenance organization or self-insurance.
2 It applies to any group plan that covers medical services, including dental care, vision care and prescription drugs. It does not apply to plans that provide only disability or life insurance benefits.
3 It applies only to employees and dependents who lose coverage due to a “qualifying life event.” This includes termination of employment (except for gross misconduct), reduction in work hours, death, divorce, legal separation or eligibility for Medicare, as well as a change in status of a covered dependent or spouse. Being called up for active military duty also triggers COBRA eligibility when an employer doesn’t voluntarily maintain a reservist’s coverage.
Employers subject to COBRA must:
1 Notify the health plan of these qualifying events: termination or reduction in hours of the covered employee’s employment, death of the covered employee, a covered employee becoming entitled to Medicare or bankruptcy of a private-sector employer.
2 Offer COBRA beneficiaries the same coverage as they do to non-COBRA beneficiaries — usually the same plan in place immediately before the qualifying event. Any benefit changes for active employees will also apply to COBRA beneficiaries, who are entitled to the same coverage choices as all other employees, such as during periods of open enrollment.
3 Charge COBRA beneficiaries no more than the cost of coverage for active employees. However, they can add up to 2 percent to cover administrative costs.
4 Provide coverage for up to 18 months for job termination or a reduced work schedule. Certain qualifying events, or a second qualifying event during the initial coverage period, may extend coverage to a maximum of 36 months. Employers may also provide coverage beyond COBRA maximums.
Please note that USERRA, the Uniformed Services Employment and Reemployment Rights Act of 1994, applies to all employers. It extends the maximum COBRA coverage period for military personnel called to active duty from 18 months to 24 months.
Employees’ Rights and Responsibilities
The covered employee or one of the qualified beneficiaries must notify the plan if the qualifying event is divorce, legal separation or a child’s loss of dependent status under the plan. Within 14 days after receiving notice, the plan must provide the qualified beneficiary with an election notice, which describes rights to continuation coverage and how to make an election. Beneficiaries will have at least 60 days to elect coverage; if they fail to do so within that time period, the plan has no obligation to provide COBRA coverage.
Individuals and families who might qualify for health insurance tax credits might opt to buy coverage in the Health Insurance Marketplace instead. Being eligible for COBRA does not limit eligibility for coverage or a tax credit through the Marketplace.
COBRA-eligible employees and their dependents should be aware of changes the Affordable Care Act has made to insurance enrollment. Formerly, a person could buy individual market health coverage at any time. Now, individuals and families can buy coverage only during an open enrollment period.
If their COBRA coverage ends outside the open enrollment period, beneficiaries qualify for a special enrollment period. In the Marketplace, a special enrollment period of 60 days following certain life events (for example, marriage or birth of a child) will apply. Job-based plans generally allow special enrollment periods of 30 days.
If beneficiaries decide to end their COBRA coverage early, they must wait until the next open enrollment before they can buy a Marketplace plan. Open enrollment for 2017 coverage runs from November 1, 2016 to January 31, 2017.