When employees and their family members lose their group health coverage due to termination of employment or a reduction in work hours, they now have three options:
1) COBRA continuation on the existing group plan
2) HIPAA special enrollment on a spouse’s plan
3) ACA special enrollment in the individual market
Those who choose option one, COBRA continuation, have an additional special enrollment opportunity under both the ACA and HIPAA when their COBRA coverage expires.
However, as a recent Kaiser Health News article points out, people who choose to sign up for COBRA continuation may be leaving a lot of money on the table. That’s because COBRA coverage disqualifies participants from receiving a premium tax credit in the individual market (but eligibility for COBRA does not).
The good news is that people who originally signed up for COBRA but now realize that the individual market may have been a better option for them don’t necessarily have to wait until the end of their continuation period to purchase an individual health plan and apply for a premium tax credit. They can choose to enroll during this year’s open enrollment period, which begins November 1st, with coverage starting as early as January 1st.
Any broker or third party administrator who works with a lot of COBRA participants can automate this process by setting up a private health insurance exchange to give existing COBRA participants and newly eligible individuals another option. Under COBRA, members must pay the full premium, including the amount that the employer paid while they were active employees. An individual plan, however, may be less expensive outright and almost certainly would be less costly after applying any government subsidies the family qualifies for.
One additional benefit of recommending individual market coverage to COBRA-eligible individuals is that it moves them off of the company’s health plan. Since both large and self-insured employers are rated based on experience, it’s usually to the employer’s advantage to reduce the number of COBRA participants. This sort of out-of-the-box thinking could help brokers who are targeting large employers differentiate themselves from the competition and win some business.