COBRA Articles

Q: What elements of health reform will impact COBRA as we know it?
A: Most industry experts believe that the sweeping healthcare reform law enacted in March will have very little effect on COBRA administration. While the law includes hundreds of new requirements for health coverage, it leaves the basic structure of employer-provided health coverage in place. Furthermore, the coverage available on an individual basis, even through insurance exchanges, is likely to be expensive and not as comprehensive as employer-provided group coverage. COBRA exists to help individuals make transitions and bridge coverage gaps. As long as transitions and gaps exist, so will COBRA.

The U.S. Department of Labor (DOL) confirmed this view in FAQs posted on its Web site (www.dol.gov/ebsa/faqs/faq-PPACA.html). Specifically, DOL noted that the health reform law did not: eliminate or change COBRA rules; extend COBRA time periods; or extend the premium subsidy law. More information on the implications of reform on COBRA administration can be found in "Mandated Health Benefits — The COBRA Guide," published by Thompson Publishing Group.

Q: How will COBRA potentially change?
A: I expect COBRA to evolve to meet employers’ and employees’ changing needs. Here are a few changes we may see in the future.

•Access may be extended. According to Mary Carmichael’s December 29, 2009, article in Newsweek, “People who've been laid off and have turned to COBRA as a way of keeping their old employer-based insurance may also get a little help. Under the House bill, they'll be able to keep their COBRA until the state exchanges are ready, not just for the 18 months after their layoffs.” The COBRA extension Carmichael references was not confirmed in the final bill, but it’s something that may gain importance as ARRA subsidies expire. States like New York and California have already taken it upon themselves to go beyond COBRA to enact 36-month continuation rules. There will likely be more to follow.

•Certificates of Creditable Coverage could be eliminated. In the world of preexisting conditions, Certificates of Creditable Coverage are essential to health insurance underwriting. Every insurance underwriter wants to know WHAT he or she is insuring before issuing a policy. This is easy if the individual was previously insured because a documented health history is easily accessible. Not so for those without insurance. In the past, anyone with a coverage gap of 62 days or more was subject to preexisting condition exclusion. In the world of health reform, preexisting conditions will eventually go away and along with it Certificates of Creditable Coverage may also go by the wayside. Despite this subtle change, I believe COBRA will continue to bridge gaps by continuing coverage, coordinating benefits and facilitating transition periods.

•COBRA rules may become highly segmented and situational. Before 2009, COBRA administration was uniform in nature. Then came ARRA. For the first time ever, ARRA caused COBRA administration to become highly customized and situational. For example, the March 2010 Temporary Extension Act linked two employment events – reduction in hours and termination. So, to administer benefits properly, employers not only need to know if an employee was terminated, they also need to know if the employee had a reduction in hours prior to the termination. Believe it or not, many employers don’t have a way of linking these two events in their human resource systems. Going forward, we’ll see more of these types of complicated rules. After all, the health reform is captured in a 2,700-page document.

Q: How will more healthcare choices and more healthcare access points impact employers’ notification burdens?
A: In the age of healthcare reform, employers will need assistance with tracking and monitoring healthcare and COBRA-related notices more than ever before. Under the new legislation, employers must comply with a variety of notice requirements and must provide health exchange vouchers to employees who meet certain criteria. Effective 2014, many employers will face automatic enrollment requirements and penalties for noncompliance.

With these new requirements in mind, outsourcing COBRA administration could eventually expand to outsourced health reform notice administration – almost like a "life event management kit" to help workers through the full suite of work continuation and transitional issues. Whether you like COBRA or not, the fact is that it’s been working for the past 24 years. A closer look at COBRA’s best practices might offer insightful precedence to how continuation is managed in the future.

Q: How will health brokers be impacted?
A: The Agent’s Sales Journal recently spoke with Richard L. Lungen, president of National Health Options, about the future of health insurance. When asked about the outlook for brokers, Lungen said, “As much as we’d like to suggest otherwise, we believe the impact on agents will be negative due to carriers cutting costs and the onset of exchanges. Agents must offer a variety of products and services that are creative and can be customized to fit group needs. There will still be a need for consultative services for groups and individuals to understand their benefit options, but margins and opportunities will likely be reduced post-healthcare reform. The agents that survive and thrive will be those that recognize the need for change and provide additional options for their client base.”

I agree with Lungen’s comments, and I also believe that the future belongs to the efficient and the adaptable. As you search for solutions for your clients, identify administration choices that embrace technology and facilitate a higher degree of data profiling – all in a highly efficient manner. I urge you to embrace the coming changes and help your clients become better employers.

The future belongs to the efficient and adaptable
In closing, I’d like to inspire you with a true story about my sister who was diagnosed with cancer almost 25 years ago. Here in the Midwest, if you have cancer you can get treatment through traditional venues or you can travel to the Mayo Clinic in Rochester, Minn. When my sister was diagnosed, she went through weeks of testing and consultations only to be given a bleak prognosis. As a last ditch effort, we made the six-hour trip to the Mayo Clinic. My sister is alive and still in remission today thanks to that decision.

At the Mayo Clinic, my sister sat in an auditorium with hundreds of other patients with her full medical file in hand. At the front of the auditorium were entrances to receive every type of diagnostic test imaginable. When her name was called, she proceeded to the appropriate door with her records and received the needed test. In a matter of hours, she (along with a whole auditorium of people) had completed all necessary tests. No driving around the city. No exhaustive waits. No lost records. In a matter of hours, we achieved that which had taken weeks elsewhere. This experience was the epitome of efficiency, adaptability and MORE. They bridged the gap between diagnosis and treatment, facilitating a smooth transition. This is my vision of the future COBRA.

Robert Meyers has more than 20 years of experience in business management and COBRA. He is the founder and president of Kansas-based COBRA administrator, COBRAGuard. For questions or more information, please visit COBRAGuard.net or e-mail Robert at robert.meyers@cobraguard.net.