COBRA and ACA

Long before the Affordable Care Act (ACA), the Consolidated Omnibus Budget Reconciliation Act (COBRA) required employers that employed 20 or more workers for at least half the year and that offered health coverage to permit workers who leave the job to continue their health coverage for a set period.

ACA did not change in any way the COBRA option. However, some who are eligible for COBRA may find that coverage through an exchange (especially those qualifying for some government assistance) is less costly. The Department of Labor has provided some updated guidance on COBRA and the ACA option.

COBRA essentials
COBRA applies if someone with employer health coverage experiences a “qualifying event” (assuming the employer is large enough to be subject to COBRA). This is termination of a job, voluntarily or involuntarily (other than for some serious offense) or a reduction in hours that makes a worker ineligible for employer health coverage. Spouses and dependents of covered employees may also be eligible for COBRA (e.g., a spouse who divorces an employee who has health coverage through an employer). The basic COBRA rules are unchanged.

A reduction in hours has not traditionally been a triggering event. Now, the reality is that some employers (those with 50 or more full-time employees that make them subject to the employer mandate under ACA) have reduced workers’ hours below 30 per week (making workers the so-called “29ers”) so that they are not treated as full-time workers that must have employer health coverage when the employer mandate takes effect.

Notice requirements

You must furnish notice to each covered employee (and their spouse if covered under the plan) not later than the earlier of: (1) 90 days from the date on which the covered employee or spouse first becomes covered under the plan or, if later, the date on which the plan first becomes subject to the continuation coverage requirements; or (2) the date on which the administrator is required to furnish an election notice to the employee or to his or her spouse or dependent.

The Department of Labor has a model notice that you can use to satisfy the general notice requirement. It also has a model election form that you can give to employees, spouses, and dependents to opt for COBRA. Using a model form ensures that you provide all required information. There has been no change in the notice requirements.

ACA alternative
Companies can inform employees, spouses, and dependents about their coverage options available through a government exchange, especially if they are eligible for a premium tax credit to help pay for some or all of the cost of coverage in plans offered through the exchange and cost-sharing reductions to lower out-of-pocket costs for deductibles, coinsurance, and copayments. There’s no mandatory notice requirement for employers here. COBRA may be more expensive than the options through an exchange after factoring the government assistance (the credit and cost-sharing reductions). If workers opt for COBRA, they do not receive any such government assistance. It’s up to employees to determine which option is better for them.

Conclusion
Review your current COBRA policies. Decide how to alert departing workers to the government’s exchange alternative for health coverage.

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