In a recent Kaiser Health News article, produced in collaboration with the Chicago Tribune, staff writer Jay Hancock reports that employers could save billions of dollars next year by shifting COBRA participants to the new guaranteed-issue individual policies in the exchange.
The article claims that the new “insurance marketplaces created by the Affordable Care Act are expected to all but replace COBRA coverage in which ex-employees and dependents can remain on the company plan if they pay the premiums.”
Why? It’s simple. Most people on COBRA are unhealthy – that’s why they sign up. When they lose their group health coverage, healthy people have the option of purchasing an individual health insurance policy, but former employees with pre-existing medical conditions don’t currently have this option in most states since insurance companies can decline people who are likely to have large claims. So these individuals choose to continue their group coverage, even though they now must pay full price plus up to a 2% administrative fee and they no longer get to pay with pre-tax dollars.
Still, as the article points out, what former employees pay for COBRA usually isn’t enough to cover the cost of their claims, which average 54% more than active workers, and this adds up to big money for self-insured companies. But next year these individuals may choose to purchase a plan in the individual market since all plans will be guaranteed issue with no waiting period or surcharge for pre-existing medical conditions, so the claims burden would be shifted from large employers to the individual carriers participating in the exchange.
Does this mean COBRA is going away? Certainly not. But the people who sign up for COBRA will likely change. While traditional COBRA participants will likely shift to the individual market, it’s possible that higher-paid former employees and their families – those with incomes over 400% of the federal poverty level – will choose to continue on their group plan. It’s possible that the group rates, even without an employer contribution, will be less costly than the non-subsidized premiums in the individual market. This could be especially true for older individuals who get to pay a lower composite rate for the group plan since they benefit from younger employees who help offset the price. Younger people, on the other hand, might do better with the age rating in the individual market.
The takeaway for brokers
What this means for brokers, though, especially those who can offer individual options through a private exchange site, is that they can offer a money-saving solution to large, self-insured employers, whether they’re the current broker of record or not. To get their foot in the door, it might be wise for agents to team up with a TPA that offers COBRA administrative services to large employers.
This is another in a long list of potential ways that brokers can generate a lot of individual leads next year. Others lead-generating ideas include talking with employers about dropping their group coverage so employees can access the subsidies; asking employers to let the agent talk with part-time employees who are ineligible for group benefits; or targeting small employers who don’t currently offer a group health plan.