Recently, the delay of "pay or play" and seeming disarray over implementation of the state insurance exchanges have underscored the confusion surrounding the Affordable Care Act. A lengthy list of new rules joins existing regulations that have governed the administration of health plans for years. Regulatory guidance has been uneven, and just how the ACA affects longstanding law - including COBRA - has appeared unclear.
For example, there is the misperception that COBRA no longer applies. On its website, The Department of Labor, the federal agency that regulates COBRA, states: "PPACA did not eliminate COBRA or change the COBRA rules." Employers need to continue complying with COBRA. Misperceptions stem from the misunderstanding that exchanges will eliminate the need for COBRA. Yes, the ACA requires that exchanges be operational in states by Oct. 1, 2013. But this will be another option, not a replacement, for qualifying individuals who otherwise lack health insurance and also qualify for COBRA.
"It depends on the need," says Kevin Cogan, director of employee relations and benefits at Ace Hardware Corporation and a member of Ceridian's Customer Advisory Board. "If you have a rich plan, then those who exit, but need and use health care, are probably going to stay onboard. They need that kind of coverage. Driving that is whether or not platinum plans under the exchanges, for instance, turn out to be as good as COBRA."
Health exchanges in flux
The final makeup of the health exchanges is difficult to predict. As The Institute for HealthCare Consumerism has documented, 29 states have declined to establish one. These states have defaulted to a federally-facilitated exchange marketplace.
Even with exchanges implemented perfectly, however, compliance with COBRA will remain the same. Individuals whose recourse would normally be only employer-sponsored coverage through COBRA or hard-to-procure individual coverage will have some iteration of the exchanges available to them, too.
False impressions surrounding the ACA have fueled myths about COBRA compliance. Following are five attributable to confusion over exchanges, and an explanation of the reality.
Myth No. 1: Exchanges will be consistent in each state.
Reality: Each state may design its exchange differently, just as Massachusetts and Utah have. As noted, a majority of states have decided not to establish a state-run exchange. Additionally, different carriers may cause Federally-operated exchanges to run differently in each state.
Myth No. 2: Exchanges will be less expensive than employer-provided benefits.
Reality: This will depend on the risk pool entering each exchange. If only the sickest enter, exchanges will be more costly. "It may all come down to cost," says Geoffrey Mann, senior manager, product compliance, for Ceridian. "It's not at all clear today that the same coverage will cost someone less through a marketplace than COBRA. And, even if the cost is comparable, there may be other reasons to hold onto employer coverage."
Myth No. 3 Employees will prefer exchanges to other health insurance options.
Reality: Several reasons might sway individuals to continue their current health insurance: Their provider networks may not be offered in exchanges. Dental and vision coverage may not be offered. Individuals may have already met deductible or out-of-pocket requirements. And, though the form to apply for exchange eligibility has been pared from 21 to four pages, applicants may find the process too confusing or complex and elect to remain on COBRA.
Myth No. 4: Exchanges will be a viable option for all employees in 2014.
Reality: Until 2017, exchanges will only be available to individuals and to organizations with fewer than 50 employees (in Hawaii, 100). Additionally, delays may themselves render them inoperative or short of fully operational beyond 2014.
Myth No. 5: The Marketplace will completely address the continuation of health benefits.
Reality: If this were the case, COBRA would have been repealed. Furthermore, the DOL recently made changes to its model COBRA Election Notice, suggesting the agency's view that COBRA and exchanges will co-exist for the foreseeable future. Furthermore, the many practical considerations mentioned in the reality behind Myth No. 3, above, suggest COBRA's perpetuity, too.
Changes to COBRA might come in 2017, when large employers may become eligible to participate in the Marketplace. Their workforces would expand the base of exchange-eligible individuals, and Congress might then consider revisiting provisions of COBRA. For now, however, employers must comply with all aspects of COBRA.
Davis is VP of product management at Ceridian HCM.
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