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Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.


Drop COBRA for Exchange?

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Question: Can I drop my COBRA plan and buy a Covered California plan on Jan 1, 2014? If so, can I get a subsidy if my income qualifies?

Answer: A person on COBRA will not be eligible for coverage in Covered California unless their COBRA premium is “unaffordable”, that is, it fails the 9.5% of income test (read Bad News …. In that case you are eligible for Covered California coverage and also eligible for a federal subsidy if your income qualifies you. A person whose COBRA coverage is “affordable”, can drop their coverage and enroll in an ACA compliant off-exchange plan as of Jan 1, 2014.

7 Comments

Jack …

You’re still within the 60-day “life change event” window, so yes, you can apply through Covered CA. However, if you have $0 income, then you will qualify for Medi-Cal, not a commercial health plan. That could disrupt your cancer therapy.

I was terminated from my job 4/26/16. I had to take Cobra because I have skin cancer and soon afterwards found out I had stage 2 melanoma and required an operation. I have paid for 2 months but need to get on covered california because I cannot afford the cobra payments. ZI am unemployed due to my illness.. Is this possible? I have to be insured as I am in the middle of treatment.

Agent 9 …

Your client should not drop COBRA continuation coverage until she is enrolled in a replacement plan first.

Complete her enrollment via CoveredCA before 3-15 for a 4-1-2014 effective date. Once she receives the payment notice from the insurer, she can make that payment and terminate her COBRA continuation effective 4-1-2014.

Although failure to pay the premium for her continuation coverage will put her into a grace period and/or terminate her COBRA continuation, it is best to tell her to inform the employer of her termination (after replacement coverage has been established) prior to the premium due date to avoid any hassles.

I have a potential customer that is on Cobra wanting to insure with CC since she qualifies for a subsidy. She was told that she has to terminate Cobra first leaving her without insurance and apply to CC only after she was terminated from Cobra. Your thoughts on how to insure her without laps in coverage. Here also I called CC and they did not know what to do including talking to a supervisor. Thank you

“I would read these regulations and comments to mean that COBRA is optional and that if the COBRA is dropped, the person would be eligible for subsidies on the exchange because COBRA is not considered unless the person is actually enrolled during the same month that they are enrolled in an exchange policy. Under this regulation, affordability is irrelevant.”

100% correct.

“COBRA is not employer subsidized — so once the person leaves employment and becomes COBRA-eligible, they no longer have the potential to receive a subsidy from an employer.”

There might be a few employers who pay for continuation coverage for a limited period of time as a “separation” benefit for employees who are laid off. Other than that, I fully agree.

I would interpret the law differently. Here is the specific regulation that governs:

Citation: 26 CFR 1.36B-2 - Eligibility for premium tax credit. Link: http://www.law.cornell.edu/cfr/text/26/1.36B-2

Quote:

(a) In general. An applicable taxpayer (within the meaning of paragraph (b) of this section) is allowed a premium assistance amount only for any month that one or more members of the applicable taxpayer’s family (the applicable taxpayer or the applicable taxpayer’s spouse or dependent)— (1) Is enrolled in one or more qualified health plans through an Exchange; and (2) Is not eligible for minimum essential coverage (within the meaning of paragraph (c) of this section) other than coverage described in section 5000A(f)(1)(C) (relating to coverage in the individual market).

(iv) Continuation coverage. An individual who may enroll in continuation coverage required under Federal law or a State law that provides comparable continuation coverage is eligible for minimum essential coverage only for months that the individual is enrolled in the coverage.

This is discussed in detail in Federal Register Vol 77. Link: http://www.gpo.gov/fdsys/pkg/FR-2012-05-23/pdf/2012-12421.pdf

Quote:

Commentators similarly asked if individuals who enroll in continuation coverage and then disenroll from it later during the year are treated as eligible for minimum essential coverage for the entire year. In response to these comments, the final regulations clarify that an individual is treated as eligible for minimum essential coverage under an eligible employer-sponsored plan …. in continuation coverage only for months the individual is enrolled in the coverage.
(at p. 30381)

I would read these regulations and comments to mean that COBRA is optional and that if the COBRA is dropped, the person would be eligible for subsidies on the exchange because COBRA is not considered unless the person is actually enrolled during the same month that they are enrolled in an exchange policy. Under this regulation, affordability is irrelevant.

There is logic in this distinction: employer-provided insurance is typically subsidized by the employer. So the rules for tax-based subsidies on the exchange are written in a way so as to prevent employees from foregoing the employer subsidy in favor of the government subsidy. COBRA is not employer subsidized — so once the person leaves employment and becomes COBRA-eligible, they no longer have the potential to receive a subsidy from an employer. So even though COBRA is rooted in employment history, it functions as a stand alone policy for which the insured bears full responsibility for payment.

The statute itself - 26 USC 36b - http://www.law.cornell.edu/uscode/text/26/36B - could be interpreted differently as it does not specifically reference continuation coverage, but the regulations establish how IRS will interpret the statute.

I believe the response is incorrect today, although the information in the earlier blog post was accurate at the time.

All of the information provided by Covered California during agent certification training indicated that a person no longer has to exhaust their COBRA continuation period (as was required by HIPAA in order to be eligible for a HIPAA-conversion plan, and the PCIP program which will die a well-deserved death on 1-1-2014). Persons covered under a former employer-sponsored health plan through COBRA continuation may drop that coverage and enroll in an exchange-based plan at any time — constituting a loss of employer-sponsored coverage, and not only during open enrollment.

If you want new coverage to be effective on 1-1-2014, then you may enroll in a plan through Covered California now, effective on 1-1, and simply need to notify the existing insurer that your coverage will terminate at the end of 2013.

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