PPACA exchanges promoted in place of COBRA

Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. Photo: AP Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. Photo: AP

With the federal and state exchanges now up and running, the Obama administration on Friday said it wants to help clarify any confusion that might exist about whether workers who lose their jobs are still eligible for insurance through COBRA.

The answer: Yes, they are, though people also can buy coverage through a public exchange – and most likely at a lower cost.

“In many cases, workers eligible for COBRA continuation coverage can save significant sums of money by instead purchasing health insurance through the marketplace,” Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi said in a statement.

The administration’s stance, announced Friday, answers a question that’s been top-of-mind for employers since the implementation of Obamacare. 

While the new law has no direct impact on the Consolidated Omnibus Budget Reconciliation Act, the indirect effects of the Patient Protection and Affordable Care Act eventually could render COBRA meaningless.

COBRA was designed to bridge coverage for employees who lose their job, or lose health coverage through their job. This was deemed necessary because, depending on what they cover, individual policies can be more expensive than group plans and quite often imposed pre-existing condition exclusions.

PPACA, however, severs the link between employment and health care. It did this by prohibiting the pre-existing condition exclusions and creating exchanges where individual coverage is supposed to be available at more affordable rates.

Workers eligible for employer-sponsored coverage generally must be informed of their right to COBRA continuation coverage when they start their jobs. They also must be informed of their right to purchase COBRA coverage when they’re either laid off or fired.

The administration wants to change the template for notices employers use so they include information on the exchanges and the government subsidies available depending on household income levels.

The Departments of Labor, Health and Human Services, and Treasury also said they’ve published frequently asked questions related to the proposed changes.

The FAQs are posted on the Department of Labor website and the HHS website.

The updated model notices are posted on the Department of Labor website at http://www.dol.gov/ebsa/modelgeneralnotice.doc and http://www.dol.gov/ebsa/modelelectionnotice.doc.

Also read:

COBRA laws can be challenging for employers
HR pop quiz: Electing COBRA

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