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COBRA and the ACA: Compatible or Irreconcilable?

Thursday September 5th 2013

Several key provisions of the Affordable Care Act (ACA) have now been delayed. When the ACA has fully achieved lift off, what will become of COBRA?

The simple answer is that COBRA will continue to fly, until and unless another law permanently grounds it. Here are some observations around the interplay between the ACA and COBRA:

  • The ACA likes COBRA. Parts of the ACA looked to COBRA concepts as the gold standard for calculations. Case in point is W-2 reporting of health care coverage in IRS Notice 2012-09. More recently, the DOL thought COBRA was important enough to update the Model Election Notice when it released the Exchange Notice. Click here for our article.
  • The DOL likes COBRA. Look at this DOL FAQ, which states that the ACA “did not eliminate COBRA or change the COBRA rules.” making it clear that COBRA is not going away. And take a gander at this lengthy 25-year proclamation by the DOL from 2011.
  • COBRA fills some ACA gaps. Granted, the Health Insurance Marketplace will provide COBRA qualified beneficiaries with some alternatives for medical coverage. In some cases, the alternatives may be cheaper, but that is not certain. Also, understand that stand-alone dental, vision, prescription drugs are not required to be offered in the marketplace. Neither are flexible benefits like HRAs and Health FSAs. COBRA offers these benefits to the extent that they are employer-sponsored coverage.
  • To some extent, the marketplace likes COBRA. To some extent, the Marketplace coordinates with COBRA. For example, take your most common reason for termination of COBRA:  premium non-payment. If a qualified beneficiary loses coverage because of non-payment, this person is not entitled to a special enrollment period for Marketplace coverage and must wait until the annual enrollment period. Another thing to consider is when the Marketplace opens in 2014, small employers can obtain Marketplace coverage through the Small Business Health Options Program (SHOP). This coverage would be subject to COBRA because it is employer-sponsored coverage.

This is COBRA’s current status:  a valid law. The ACA did not change COBRA, as the DOL has pointed out.

Do you think COBRA will continue to be viable? Why or why not? Please comment below.

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