COBRA and Health Care Reform

Posted: September 4, 2014

The Affordable Care Act (ACA) of 2010, commonly known as “Obamacare,” is a complex health reform system that has impacted every aspect of American medicine and health care. But how does the ACA change the familiar “COBRA” benefit that was established back in 1985?

The Consolidated Omnibus Budget Reconciliation Act (COBRA), allows employees and their dependents to continue to receive their existing health care coverage after certain qualifying events. The health care coverage usually continues for up to 18 months though in some circumstances the coverage can continue for 36 months. The only difference is the individual takes over the monthly insurance payments that the employer previously paid.

Health care Reform has not resulted in major changes to the COBRA program. The standard period of coverage is still 18 months, although some group health insurance plans are now allowed to extend the coverage further. It is uncertain how many plans will voluntarily opt to extend the COBRA coverage period. Should an individual become disabled while under COBRA coverage, they will be able to apply to have their COBRA period extended by 11 months.

One complaint that many people have is that COBRA monthly premiums are too expensive. The ACA seeks to provide a possible solution to this cost concern. During an annual open enrollment period, an individual may elect to purchase a “qualified health plan” on a state-administered Exchange in lieu of COBRA. The next available open enrollment period is November 15, 2014 through February 15, 2015.

The main benefit of the state-run Exchanges is lower cost through competition. Each state-run Exchange offers individuals a variety of health care plans to choose from and compare. It is assumed that the average person will be able to find an affordable health care plan within their budget on the state Exchange. At the very least, the plans on the Exchange should offer monthly premiums that are far lower than the typical monthly COBRA payments.

If an individual cannot find an affordable option on the Exchange, the federal government offers limited subsidies to offset the health care plan costs. Also, in the event that a state decided not to open an Exchange, individuals in that state may shop for coverage on the federal Exchange, which is accessible via the website

If an individual has already selected and started COBRA, he or she cannot transition over to a health care plan offered by an Exchange until the full 18 months of COBRA coverage are exhausted. When COBRA coverage ends, this constitutes a “qualifying event” that will allow the individual to access the state Exchange. But if the person voluntarily dropped COBRA, he or she will not be able to access the Exchange until the first date of the next open enrollment period.



Theresa Conrath

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