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Is Obamacare the End of COBRA?

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Question: As I understand it, when the ACA goes into effect, that is effectively the end of COBRA. If you lose, or resign from, a job mid-year (not during the yearly enrollment period), are you allowed to purchase insurance through the exchange at that time?

Answer: If you loose access to affordable employer-sponsored group coverage outside of the annual open enrollment period you will be eligible for a special enrollment period during which you can purchase coverage in the individual exchange. While this eliminates the need for COBRA, the Department of Labor has ruled that COBRA will continue to be available in 2014. One scenario where a person could benefit by staying on COBRA is that it is cheaper than Covered California individual coverage would be.

29 Comments

I currently am enrolled in COBRA and, surprisingly, pay a lot less than anything I can get on my own. I am supposed to have coverage through 5/2014 (the end of the 18 month period), however, just received a letter in the mail telling me my COBRA coverage is being terminated due to the ACA. Is this legal? If COBRA isn’t discontinued altogether, how can my former employer drop me 5 months early?

“One Coovered CA rep said I must be without COBRA for 3 months before the IRS gives qualification for the SUBSIDY part of the coverage. The next rep said I can qualify for the subsidy anytime I drop COBRA. Which is true?”

I can tell you that the rep who said you cannot have coverage for three months before you qualify for premium tax credits is wrong.

But the other rep might not be correct either.

Having COBRA or not, your eligibility for premium tax credits is based solely on your household Modified Adjusted Gross Income (MAGI). If your MAGI is too high for the size of your household, you will not qualify for the credits.

To be eligible for any amount of credits, your MAGI must be between 138% and 400% of the Federal Poverty Level (FPL). If your MAGI is below 138% FPL, you will be enrolled in Medi-Cal, and will not receive any premium credits.

One Covered CA rep said I must be without COBRA for 3 months before the IRS gives qualification for the SUBSIDY part of the coverage. The next rep said I can qualify for the subsidy anytime I drop COBRA. Which is true?

Dina …

DO NOT STOP YOUR COBRA CONTINUATION ANYTIME PRIOR TO 1-1-2014!!! Anyone who tells you something stupid like that is not a licensed insurance agent. None of us would ever say anything such as that. What is correct is that you cannot obtain premium tax credits to help with the former employer’s plan premium.

If you enroll in another plan during this open enrollment period and prior to December 15, then you may terminate the COBRA continuation coverage effective 1-1-2014 by notifying your husband’s former employer in December.

If you are desperate for premium tax credits, then you can simply contact Covered California and tell them you have re-estimated your 2014 income and it is $x,000 lower than you previously reported. Then you will have to accept the consequences when you file your 2014 tax return in 2015, knowing that if your actual income is too high to qualify for tax credit you will have to repay them to the IRS. If your actual income ends up being lower, then you may receive an additional tax credit at the time you file your tax return.

You can enroll in any plan of your choosing through Covered California with or without premium tax credits, or with any insurance company of your choice off the exchange through any licensed agent appointed by that company.

BUT, AGAIN!! PLEASE!! DO NOT STOP PAYING YOUR COBRA CONTINUATION PREMIUMS ANY TIME IN 2013!!

Hello. My husband lost his job only last August 13, 2013 and along with this sudden change, my husband and myself, as his dependent, lost our health insurance from Kaiser Permanente. I was forced to secure Cobra coveregae which we need to pay for $1320/month. We have been on Cobra for 2 months now and was told that Cobra coverage can be continued for 18 months. Both of us have Diabetes and Hypertension and we are both taking more than 3 prescription medications daily as maintenance. My husband is also required to get Coumadin tests every 3 months or so. I am presently working on a per diem status and I was told that my present employer cannot offer me employer sponsored heath insurance. It follows that my monthly income is not fixed too. At this time, I am getting $1700/2 weeks of work and might have an annual income this year of $44,000. Which might also be our estimated income for next year for a householf of 2, health insurance for my husband and myself. Like Mike who submitted an inquiry last September 26, I applied for Covered California for myself and my husband yesterday, October 8 however when I reviewed the response from Covered California today, both my husband and I are eligible for 0 premium assistance and I am hoping to apply for Kaiser Permanente Silver Plan and will cost us $1254/month. I do not see this helpful since this is also as much as what we are paying for Cobra considering we are, based on our estimated annual income for 2014 and at present time is $44,000. Is there any other way that we can be qualified for Premium Assistance and lower our monthly premiums that is more realistic with our present financial status and pre-existing conditions? I applied online to Covered California yesterday after a couple of advices from Covered Ca advisors who has different opinions. One advisor told me to stop my Cobra coverage to be eligible for Covered Ca Premium assistance. I am afraid though that when I discontinue Cobra coverage I do not know what will be the decision on my application and I am afraid to not have health insurance and have a gap considering our present health condition. One advisor told me to just declare that I am on Cobra on my online application yesterday which I did. Right now I am confused and worried anticipating what the reply and decision from Covered Ca.

Mike … You don’t have to continue your coverage under COBRA unless you want to, regardless of the “percentage” of income test. Effective 1-1-2014, you can terminate COBRA and start coverage with an Exchange-based plan of your choice. Because there are no preexisting exclusions, you would be eligible for your surgery — subject to deductibles and/or coinsurance or copayments, depending on the type of plan you select (as well as the surgical preauthorization requirements).

If your household MAGI is $47,000, that puts you between the 300% and 400% FPL boundaries for a household of two, and you should qualify for some amount of premium tax credit subsidy.

I have been following forums and am confused on cobra issue. I am 62 and need to retire due to health, anticipate spine surgery. I dont want to fight through state disability as system is backlogged and then 2 year wait for medicare. If I voluntarily quit job my spouse would continue to work and our household income would be $47000. My cobra premium is $812 for cheapest plan and over $1200 for best plan I need if I have surgery. Am I eligible for plan with premium assistance due to my cobra premiums exceeding 9 1/2% of income? I went to coveredCa website with my info and silver plan is $702 and then it shows $351 tax credit/premium assistance but site also shows I am eligible for 0 premium assistance.

Vanessa …

The “other” coverage you mention would be an employer-sponsored plan, not an individual plan.

“Under the ACA wouldn’t every American technically become eligible effective Jan 1?” Yes, that’s correct, too. But eligibility for an individual plan won’t affect your COBRA continuation. You won’t be dropped from your former employer’s plan.

However, you could enroll in an individual plan and your pregnancy if you haven’t delivered and/or newborn child if you have will be covered as of January 1. If you are eligible for premium tax credits, the cost of an individual plan could be much lower than what you currently pay for your former employer’s group plan.

So I’m hoping you can answer the following question for me because I have been very worried about it. I am currently on Cobra since July of this year. I elected to keep my employer medical coverage because I was pregnant when I got laid off. My baby is due December 29th, so there is a possibilty I may not deliver until ACA is in place. This makes me nervous because in the information I have from Cobra it states that if I become eligible for other health coverage, that would in turn make me ineligible for Cobra. Under the ACA wouldn’t every American technically become eligible effective Jan 1? I really don’t want to be dropped from my current plan effective Jan 1 with the baby on the way, but if I will be I need to know.

I know that this is an old thread but in case anyone else comes across this…Healthcare.gov answers this question definitively. You may drop COBRA coverage any time you wish and start the ACA coverage (and therefore be eligible for credits etc. with ACA). See https://www.healthcare.gov/what-if-i-currently-have-cobra-coverage/

“If I elect to take COBRA” and “if they chose to allow COBRA plans to be acceptable under ACA”.

These two statements are common errors in understanding COBRA. COBRA is not a type of insurance, the name of an insurance company, or anything other than the acronym for a piece of legislation from 1985 (Consolidated Omnibus Budget Reconciliation Act). That Act, among other things, gave persons enrolled in a group health plan the right to continue their plan even though they are no longer a part of the group. But instead of the employer continuing to pay some or all of the premium, the former employee, spouse, or dependent pays the full cost (plus up to 2% for the employer’s administrative expense).

A person who continues their former employer’s health plan will have “creditable coverage” under the ACA, and will not be subject to any “shared responsibility” tax penalties. But because this coverage is obtained outside the confines of the Exchange, it does not qualify for the individual tax credits.

A Silver tier plan will probably result in significantly higher out-of-pocket expenses in exchange for your $51 net monthly premium. You’ll have to do the math to determine whether the lower premium alone is in your best interest. It might not be.

You can also hire any of the 24 licensed Life & Disability Insurance Analysts in California — of which I am one — willing to do that math analysis for you.

I found this discussion very interesting. I’ll throw another point into the discussion: I’m planning to retire at the end of the year at age 61, so I’ve been doing my due diligence. If I elect to take COBRA, my monthly cost will be $380 - for a top quality plan. If I go with the silver plan in San Diego, my monthly cost will be 646 - 595 = $51. Obviously, I’ll choose the latter, but I think the guvmint could save themselves substantial amounts if they chose to allow COBRA plans to be acceptable under ACA, and allowed tax credits on them. $0.02.

It is correct to say that voluntarily stopping the payment of COBRA continuation premiums does not make one eligible for a special enrollment period. Because of conflicting statements, I’m not certain about enrolling during open enrollment and being able to drop one’s COBRA continuation after January 1, 2014 in order to obtain the tax credits. One section of the CFRs appears to say no, and in another document, the HHS staff opinion appears to leave the question unanswered. Chalk it up to the government’s desire to discriminate when it gives things for free to some people and not to others.

If a person is not going to be eligible for the tax credits, due to income, then it makes no difference. The person could apply for health insurance during this first open enrollment period, which may run as late as the end of March 2014. But if a person misses open enrollment, stops paying for COBRA continuation, and cannot obtain insurance from another source, they will be liable for some or all of the $95 penalty for failure to maintain “minimum essential” health insurance. Up to three months without insurance in a year can be exempted from the penalty.

Do you still think the answer is yes in view of the posts on this subject?

So Max, in conclusion, it is correct to say if you’re on COBRA, you can’t get an exchange policy until the original COBRA period (e.g., 18 months) ends, whether or not you stop paying COBRA premiums.

Stopping the payment of COBRA premiums midstream does not make someone eligible on the exchange.

The open enrollment and special enrollment periods do not apply until the pre-determined (e.g., 18 month) COBRA coverage period ends.

Right?

Well, as I was putting the finishing touches on a Navigator training manual, I did find the following under “Eligible” also tucked away in the CFRs:

148.103 Definitions.

Unless otherwise provided, the following definition applies:

Eligible individual means an individual who meets the following conditions:

(1) The individual has at least 18 months of creditable coverage (as determined under § 146.113 of this subchapter) as of the date on which the individual seeks coverage under this part.

(2) The individual’s most recent prior creditable coverage was under a group health plan, governmental plan, or church plan (or health insurance coverage offered in connection with any of these plans).

(3) The individual is not eligible for coverage under any of the following:

(i) A group health plan.

(ii) Part A or Part B of Title XVIII (Medicare) of the Social Security Act.

(iii) A State plan under Title XIX (Medicaid) of the Social Security Act (or any successor program).

(4) The individual does not have other health insurance coverage.

(5) The individual’s most recent coverage was not terminated because of nonpayment of premiums or fraud. (For more information about nonpayment of premiums or fraud, see § 146.152(b)(1) and (b)(2) of this subchapter.)

(6) If the individual has been offered the option of continuing coverage under a COBRA continuation provision or a similar State program, the individual has both elected and exhausted the continuation coverage.

===============

Having found this, between now and October 1, persons terminating employment and offered COBRA continuation should probably reject it unless absolutely necessary to keep it, even though HHS spoke about evaluating each person on an individual basis. Those who are already in the midst of their 18-, 29-, or 36-months of continuation, unless you wish to run the risk of being caught violating the “honor system”, probably need to keep it in force.

One of the escapes I did see is moving to an area outside the employer plan’s service area. That is a terminating condition under COBRA — you cannot keep what doesn’t work. So I think a person could move 50 or 100 miles away, be “forced” to give up their COBRA continuation, and thus become an eligible individual.

Where there’s a will, there’s a way. And in every piece of Congressional legislation that was too long for anyone to actually read before they voted on it, there are bound to be gaping holes big enough to drive a semi through.

You are on the wrong page! While COBRA continuation IS still an employer-sponsored plan, voluntarily terminating coverage in mid-year does not trigger a special enrollment period. That’s very different than being able to enroll in a plan during open enrollment, when the benefit will not begin until January 1, 2014.

Look at the staff commentary on page 18368 instead, where it states:

Comment: Several commenters asserted that individuals enrolled in continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) or in an eligible employer-sponsored plan should have the opportunity to be conditionally determined eligible for advance payments of the premium tax credit and cost-sharing reductions, subject to termination prior to enrollment in a QHP. These commenters reasoned that individuals should not be forced into uninsured status in order to obtain a determination of eligibility for tax credits and risk remaining uninsured if they are found ineligible and the enrollment period for electing COBRA or coverage in an eligible employer-sponsored plan passes. Response: Section 36B(c)(2)(C)(iii) of the Code states that an individual who is enrolled in an eligible employer-sponsored plan is not eligible for advance payments of the premium tax credit; because of the statutory prohibition on providing cost-sharing reductions for any month that is not a month for which the enrollee is eligible for premium tax credits, this bar also applies to eligibility for cost-sharing reductions. However, while an individual must terminate coverage in his or her employer-sponsored plan prior to the period for which he or she actually receives advance payments of the premium tax credit and/or cost sharing reductions, we clarify that the individual need not terminate coverage to receive an eligibility determination that he or she is eligible to receive these payments and reductions. Accordingly, we have amended the language in § 155.320(d)(1) of this final rule to clarify that an attestation regarding enrollment in qualifying coverage in an

eligible employer-sponsored plan should be based on the applicant’s reasonable expectation of enrollment in the benefit year for which coverage is requested.

As I read this, it says to me that the individual may certainly apply during the open enrollment period with the intent to cancel coverage in December, so that on January 1, 2014, he may begin receiving premium tax credits.

He can “attest” to the fact that he will NOT be “enrolled” in an employer-sponsored plan in 2014. The language of the CFR section (155.320(d)2) does not discuss “eligibility” for an employer-sponsored plan. Accordingly, if the individual terminates in December 2013, he will not be “enrolled” in the employer plan in January 2104, and everything is copacetic.

Besides, last Friday (July 5), it was announced that everyone is on the “honor system” for 2014. Verifications of income and employment will not be made and employers will not face the “shared responsibility payment” for having employees jump ship and head to the Exchange for their insurance. Once again, while COBRA continues an employer-sponsored plan for non-employees, the non-employees are not forced to stay on that plan like employees are.

You are on the wrong page! While COBRA continuation IS still an employer-sponsored plan, voluntarily terminating coverage in mid-year does not trigger a special enrollment period. That’s very different than being able to enroll in a plan during open enrollment, when the benefit will not begin until January 1, 2014.

Look at the staff commentary on page 18368 instead, where it states:

Comment: Several commenters asserted that individuals enrolled in continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) or in an eligible employer-sponsored plan should have the opportunity to be conditionally determined eligible for advance payments of the premium tax credit and cost-sharing reductions, subject to termination prior to enrollment in a QHP. These commenters reasoned that individuals should not be forced into uninsured status in order to obtain a determination of eligibility for tax credits and risk remaining uninsured if they are found ineligible and the enrollment period for electing COBRA or coverage in an eligible employer-sponsored plan passes. Response: Section 36B(c)(2)(C)(iii) of the Code states that an individual who is enrolled in an eligible employer-sponsored plan is not eligible for advance payments of the premium tax credit; because of the statutory prohibition on providing cost-sharing reductions for any month that is not a month for which the enrollee is eligible for premium tax credits, this bar also applies to eligibility for cost-sharing reductions. However, while an individual must terminate coverage in his or her employer-sponsored plan prior to the period for which he or she actually receives advance payments of the premium tax credit and/or cost sharing reductions, we clarify that the individual need not terminate coverage to receive an eligibility determination that he or she is eligible to receive these payments and reductions. Accordingly, we have amended the language in § 155.320(d)(1) of this final rule to clarify that an attestation regarding enrollment in qualifying coverage in an

eligible employer-sponsored plan should be based on the applicant’s reasonable expectation of enrollment in the benefit year for which coverage is requested.

As I read this, it says to me that the individual may certainly apply during the open enrollment period with the intent to cancel coverage in December, so that on January 1, 2014, he may begin receiving premium tax credits.

He can “attest” to the fact that he will NOT be “enrolled” in an employer-sponsored plan in 2014. The language of the CFR section (155.320(d)2) does not discuss “eligibility” for an employer-sponsored plan. Accordingly, if the individual terminates in December 2013, he will not be “enrolled” in the employer plan in January 2104, and everything is copacetic.

Besides, last Friday (July 5), it was announced that everyone is on the “honor system” for 2014. Verifications of income and employment will not be made and employers will not face the “shared responsibility payment” for having employees jump ship and head to the Exchange for their insurance. Once again, while COBRA conti

COBRA appears to be employer-sponsored coverage and that means you would have to wait for COBRA to end before getting a premium subsidy.

Someone who has already accepted COBRA coverage does NOT qualify for a premium credit until the end of the 18-month COBRA coverage. They could not enroll during open enrollment for the premium unless it happened to fall within the open enrollment period.

Why is that?

One of the requirements in the final regulation on exchanges (March 27, 2012, page 18453) is that someone is only entitled to a premium credit if they are not eligible for minimum essential coverage.

IRC section 5000A(f)(2) says that coverage under an eligible employer-sponsored plan is minimum essential coverage.

Being enrolled in COBRA seems to prevent qualifying for a premium credit until the 18-month COBRA coverage period ends.

It is implied that anyone can enroll in a QHP during the open enrollment period. This includes stopping premium payments for COBRA continuation coverage. In the thousands of pages of regulations and commentaries, I don’t know if your specific question has been definitively addressed.

But “open enrollment” means exactly that anyone may enroll during this time period. Paying COBRA continuation premiums is not mandatory. What the special enrollment period exclusion you refer to above is all about is to deal with a person who fails to enroll during open enrollment and later realizes there were less costly plans available, and now wants to enroll.

They DON’T GET a special enrollment period by virtue of being terminated from their health plan for nonpayment of premium. If they miss open enrollment in 2013, they have to either wait for open enrollment in 2014 or exhaust their COBRA continuation period by paying premiums to the last month.

Even though all parties have had more than three years to get to this point and line up all their ducks in a row, it hasn’t been accomplished. Just like the early implementation of Medicare in the 1960s, it will probably take several years to figure out what loopholes need to be plugged with minor regulatory fixes and which cannot be plugged without major new legislation from our otherwise mostly do-nothing-but-bicker-along-party-lines Congressional delegation.

We really needed legislative overhaul (like federal term limits) more than we needed the kind of health care reform that is contained in the PPACA.

I am still concerned that I will not be able to discontinue COBRA coverage in the middle of it and be eligible to get coverage on the exchange.

I looked up the final regulation on exchanges put in the Federal Register on March 27, 2012.

On page 18463, it says as to special enrollment,

“(e) Loss of minimum essential coverage…does not include termination or loss due to— (1) Failure to pay premiums on a timely basis, including COBRA premiums prior to expiration of COBRA coverage,”

I realize this deals with special enrollment and it says I can’t just stop paying COBRA premiums and be eligible for special enrollment.

Can you give me where in a regulation it says I can do regular open enrollment by stopping payment on my COBRA in the middle of (and prior to the expiration of) my COBRA coverage?

Thanks,

John

Please don’t confuse “COBRA” with a type of health insurance. You have voluntarily elected to continue your former employer’s group health insurance plan. “COBRA” was the title of the legislation passed by Congress in 1985 that allows folks to do that.

The length of continuation depends on the qualifying event and is either 18 or 36 months. A person may voluntarily terminate COBRA continuation at any time, and there are a few mandatory terminating events, such as nonpayment of premium and eligibility for another employer’s group health plan.

The HIPAA legislation passed in the 1990s provided access to health insurance after one’s COBRA continuation was exhausted, but not if someone terminated early. The PPACA effectively does away with that by allowing persons who terminate their COBRA continuation to immediately apply for coverage with another insurance company, through the Exchange or not.

What you will likely discover, however, is that your benefits under your current plan are better and less costly than what you will find through the Exchange. That’s due mostly to changing from a group plan to an individual plan.

If someone not only has access to COBRA but is ALREADY enrolled in COBRA that is scheduled to end in April, 2014, can he instead enroll in the Exchange on October 1, 2013 and get a premium subsidy if below 400% of the poverty level?

Max, you are correct when you say, ““the CoveredCA network” This is a misnomer. Each insurance company assembles its own provider network by contracting with physicians and hospitals. A person evaluating a health plan purchase through the Exchange would simply need to look at a plan’s provider network to see whether or not their treating physician was included, and make their choice accordingly.”

I was just being general with “CoveredCA network.” We have heard directly from one of the insurance companies on CoveredCA that they anticipate a “narrow network” for the CoveredCA plans compared to their non-metal tier plans being sold outside of the CoveredCA. And according to the news so far a consumer should be able to see a list of providers for each plan on CoveredCA when it goes fully live.

“the CoveredCA network”

This is a misnomer. Each insurance company assembles its own provider network by contracting with physicians and hospitals. A person evaluating a health plan purchase through the Exchange would simply need to look at a plan’s provider network to see whether or not their treating physician was included, and make their choice accordingly.

“access to COBRA does not make one ineligible for subsidies because there is no employer cost sharing. The insured pays the entire COBRA premium.”

This statement makes it appear that a person can continue a former group plan under COBRA and obtain the tax-credit subsidy. This is not accurate. The subsidy is only available to persons who enroll in a health care plan through the Exchange.

One cannot “enroll” in a COBRA continuation plan through the Exchange. Therefore, COBRA continuation will not come with the tax-subsidy — whether the employer contributes premium dollars or not.

What is true is that eligibility for COBRA continuation does not disqualify a person from choosing to obtain health insurance through the Exchange in order to obtain the tax-subsidy.

A person should look at the pros and cons of both options, as well as a private health insurance plan outside the Exchange. Perhaps the best person to help someone in this situation is a licensed Accident & Health Insurance agent who understands what is going on. There is no guarantee that Navigators or Assisters will have the requisite knowledge.

Another benefit of COBRA over CoveredCA: If you currently have a condition that is being treated you are probably already using the in-network providers from your group plan. There is no guarantee the CoveredCA network will include those same providers.

You assume correctly, access to COBRA does not make one ineligible for subsidies because there is no employer cost sharing. The insured pays the entire COBRA premium.

So I assume that having COBRA available once you are dismissed or resingn does not disqualify you from the exchange subsidies as “eligible for a group plan”, COBRA being the group plan?

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