Is COBRA Still Relevant Under the ACA?

The Affordable Care Act (ACA) changed a lot of things about the health insurance market in the United States. Among them: It granted some more options to those who had pre-existing conditions but who lost their access to a workplace plan because of job loss, layoff, benefit reduction or divorce.  However, COBRA hasn’t gone away, and for some individuals, it may be preferable to go the COBRA route than to try to purchase an ACA-compliant health care plan through the exchanges.

What is COBRA?

COBRA stands for Consolidated Omnibus Budget Reconciliation Act, which was the name of the law that established this particular health care provision. Under COBRA, workers are entitled to continue their workplace insurance plan for up to 18 months after they leave their employer. Usually their employer has been paying 50 percent of their health care premiums or more up until the time the worker leaves service, so the worker typically has to shoulder the entire premium, rather than just the employee-contributed portion of the premium.

COBRA For Employers

The basics have not changed for employers. Employers must still provide the same COBRA notices to workers leaving their service for qualifying reasons, just as they had prior to the Affordable Care Act.

COBRA vs. the ACA for Workers

The big change for employees comes with the additional choices available under the Affordable Care Act. While those in good health could always easily purchase private, individual or family health insurance prior to the ACA, things were much more difficult for people who had a history of previously existing conditions. In this case, some workers had a hard time finding comparable coverage. There were some allowances made for people with pre-existing conditions under HIPPA, or the health insurance Portability and Accountability Act, which restricted carriers from discriminating against workers with preexisting conditions who bought new health insurance within 63 days of losing their workplace coverage.

The Affordable Care Act, however, prohibits carriers from discriminating against pre-existing conditions across the board. It also makes a series of subsidies and tax credits available for lower to moderate-income individuals who choose to purchase insurance through one of the exchanges.

Does it make sense to continue your workplace coverage via COBRA? Or are you better off going through the exchanges? It depends. If your income qualifies you for a subsidy, you may consider purchasing an ACA-compliant plan via the exchange. This may significantly reduce your out-of-pocket cost, depending on your situation.

On the other hand, if you were very happy with your employer’s plan and you can afford picking up the employer’s share of the premium, you may want to choose to continue coverage under COBRA, which you can for up to 18 months.

At that time, you can join a new employer’s plan, or go to the exchanges. You will still qualify to purchase an exchange plan even if your COBRA runs out outside of the open enrollment period. However, you can’t cross over to an ACA exchange plan if you are dropping your COBRA coverage early unless it’s during an open enrollment period. For more information on COBRA or our COBRA administrative services through myCobraPlan, click here.