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Life Health > Health Insurance > Health Insurance

Feds may keep COBRA notice rules in place

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Employers may still have to send COBRA health coverage continuation notices to departing employees.

The Employee Benefits Security Administration (EBSA) broke the news in a set of health care continuation coverage draft regulations.

A revised model notice will mention the existence of the new Patient Protection and Affordable Care Act (PPACA) public exchange system, but EBSA intends to continue to require employers to send the notices and offer access to COBRA coverage.

In the preamble to the new draft regulations, officials do not mention the possibility of eliminating COBRA or reducing the scope of the COBRA program.

EBSA is an arm of the U.S. Department of Labor. When the Labor Department and its agencies create new forms, or make major changes to existing forms, they are supposed to send new or revised forms to a formal paperwork review process at the Office of Management and Budget.

The Labor Department believes the new COBRA notice changes are minor, EBSA officials say in the preamble.

“Therefore, no further review is requested of OMB at this time,” officials write in the preamble. “The department solicits comment on this understanding.”

EBSA is preparing to publish the draft regulations in the Federal Register Wednesday.

Comments will be due 60 days after the official publication date.

Congress included the provisions that created the COBRA coverage continuation program in the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). COBRA lets many enrollees in group health plans continue their benefits — but it also lets employers charge an amount equal to 102 percent of the coverage premiums.

In practice, because the cost of COBRA coverage is often three to 10 times higher than the typical employee share of group health coverage premiums, COBRA take-up rates have been low. 

In 2008, before Congress responded to the Great Recession by creating a temporary COBRA subsidy program, only 12 percent of the eligible departing workers paid for COBRA coverage.The workers willing to pay so much for health coverage often have serious health problems.

Because workers have been able to elect and pay for COBRA coverage as long as 105 days after going through a “qualifying event,” many have waited to see if they have big medical bills before paying for the coverage.

PPACA now requires insurers to sell all PPACA-compliant individual major medical plans to workers and dependents who have lost group health coverage on a guaranteed-issue basis. The only personal health factor a company can use when setting rates is the consumer’s age.

Consumers who are buying individual coverage because of loss of group coverage qualify for a “special enrollment period” in the individual commercial health insurance market, both inside and outside the public exchange system. They do not have to adhere to open-enrollment period schedules.

Because public exchange “qualified health plan” (QHP) coverage is usually cheaper than COBRA coverage, even for workers who must pay the full cost of QHP coverage, some employers and benefits advisors have hoped that federal regulators would eliminate the COBRA program, or make it available only to consumers who are losing group coverage and do not qualify for COBRA.

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