As part of our Robert Wood Johnson Foundation-funded Navigator Technical Assistance project, we’ve heard from navigators and assisters on the front lines of helping consumers understand their coverage options. Last month I wrote a blog post featuring one of the more difficult questions we’ve received from navigators: how to help people shut out of coverage because they live in a state that hasn’t expanded Medicaid. Another navigator recently asked us how COBRA fits into coverage options now that people who lose employer-sponsored coverage have other options. Policymakers in her state have introduced legislation that would roll back COBRA protections for employees of small businesses.
COBRA, or the Coordinated Omnibus Budget Reconciliation Act, is a federal law enacted in 1986 that allows people to remain temporarily covered under their group health plan after they would otherwise lose that group coverage. For example, individuals who lose coverage because they are losing their job or are losing eligibility for the plan because of a reduction in hours would be entitled to remain on the plan for up to 18 months. Individuals may be entitled to COBRA for other reasons. For example, an employee’s spouse would gain eligibility for 36 months of coverage after a divorce. The law applies to employers with 20 or more employees, but 40 states and the District of Columbia have so-called “mini-COBRA” laws that apply to employers with fewer than 20 employees. The maximum coverage duration in these state laws ranges from 3 months to 36.
In the new world of Affordable Care Act (ACA) protections, COBRA coverage becomes less critical. Under the ACA, people who lose job-based coverage qualify for a special enrollment period (SEP) to enroll in a plan, either inside or outside the health insurance Marketplaces, with coverage that becomes effective on the first day of the following month. If a worker knows her employment end date is coming, federal rules also allow for an individual to apply for the SEP 60 days prior to the end of coverage. And individuals who lose income along with their coverage may qualify for a premium tax credit to make coverage more affordable. In contrast, individuals enrolling in COBRA must pay the full premium, including the portion previously paid by their employer.
So is there a case to be made for continuing COBRA even with the ACA options and protections? Or, in the case of the legislation introduced in Ohio, is there a case to be made for eliminating state mini-COBRA laws?
Ohio House bill 511 would, among other things, suspend Ohio’s “mini-COBRA” law. But legislators may want to exercise caution before eliminating what has, to date, been a critical protection for millions of Americans. For example, for employees in the midst of a course of treatment when their employment ends, i.e., for cancer or other serious health conditions, it could be critically important for their health to maintain access to their treating providers. Others might need to use COBRA to maintain coverage through a job-based plan so they can avoid any gap in coverage, even a small one. The opportunity to trigger a SEP 60 days prior to the loss of coverage will help those who know a loss of coverage is coming. But not everyone will have that advance warning. If a worker suddenly learns they are losing their job – and their coverage – they may not be able to line up a new plan in time to avoid a gap in coverage.
It’s worth noting that it is these very situations that worry plan sponsors. Those who would stay with a more expensive plan so they can continue a costly course of treatment or to avoid even a small gap in coverage may well cost the plan more than they pay in premiums. And under the SEP rules, once an individual enrolls in COBRA, they cannot enroll in other coverage until open enrollment or when they exhaust COBRA, whichever is sooner. So it’s not always ideal for the consumer, if they end up stuck in a more expensive plan for longer than they’d like.
But COBRA continuation coverage was created to fill the gaps, especially for those who need care. And until we can be confident that we’ve created a seamless system of coverage for people from cradle to grave, it’s probably wise to not throw out this baby with the bathwater just yet.