Recent weeks have seen the publication of several pieces of agency guidance that reflect the increasing prominence of individual coverage on the health exchanges as an alternative to continuation of group coverage under COBRA. The new guidance consists of:
- updated model COBRA notices from the Department of Labor (both the initial or “general” notice, and the qualifying event notice) which describe exchange coverage as a COBRA alternative and mention the possible availability of exchange subsidies (both notices are available here);
- DOL proposed regulations that streamline issuance of future model COBRA notices;
- an announcement of, and links to, the new model COBRA notices and proposed regulations, in Affordable Care Act FAQ XIX, together with guidance on other ACA issues; and
- announcement, in a Department of Health and Human Services bulletin, of a limited special enrollment period permitting those who elected COBRA coverage under outdated election forms to drop it, between now and July 1, 2014, and enroll in coverage on a federally facilitated exchange (FFE); and
- an FAQ published by the Centers for Medicare and Medicaid Services (CMS) Centers clarifying the circumstances under which COBRA qualified beneficiaries may switch to exchange coverage.
Each development is discussed in turn, below.
Updated COBRA Notices
On May 2, 2014, the Department of Labor, the agency responsible for COBRA notice and disclosure duties, published online updated versions of both the “general” notice (given upon initial plan eligibility), and the “election” notice (triggered by a qualifying event). The election notice now expressly identifies the availability of exchange coverage, including access to premium tax credits for those eligible, as an alternative to COBRA coverage. The model notices currently are posted online at the DOL website in English, and Spanish language versions will soon follow.
Proposed DOL Regulations re: COBRA Notices
Also on May 2, 2014, the Department of Labor issued an advance copy of proposed regulations (technically, a “Notice of Proposed Rulemaking”) pursuant to which future model COBRA notices may appear in written agency guidance, including through online posting, rather than as “appendices” to proposed and final regulations published in the Federal Register. One of the stated reasons for this approach is to “eliminate confusion that may result from multiple versions of the model notices being available at different locations.” And in fact, if view the online version of DOL Technical Release 2013-02, which in May of last year announced earlier exchange-related revisions to the model COBRA election notice, the link to the model notice link now clicks through to the most recent update posted last week, rather than to the version that originally was issued with the Technical Release.
Summary of COBRA Developments in ACA FAQ Part XIX
May 2, 2014 also saw publication online of Affordable Care Act FAQs Part XIX, of which Q&A 1 summarizes the above developments and directs readers to the new model COBRA notices and the proposed regulation.
FAQ Part XIX contains additional guidance on a number of ACA issues including cost-sharing limitations, coverage of preventive services, and Summaries of Benefits and Coverage. I will cover this new guidance soon in a separate post.
Special Enrollment Period to Transfer from COBRA to FFE Coverage
Generally, an individual may enroll him or herself in exchange coverage upon first becoming eligible for COBRA, during an exchange open enrollment period, or upon exhausting COBRA coverage. However, persons currently enrolled in COBRA may have elected to do on the basis of COBRA notices that did not identify exchange coverage as a COBRA alternative in these situations. Accordingly, on May 2, 2014 the Department of Health and Human Services issued a bulletin announcing a limited special enrollment period, lasting until July 1, 2014, during which COBRA qualified beneficiaries in states that use the Federally Facilitated Exchange or Marketplace may drop COBRA coverage and enroll on the FFE. The guidance does not mandate that state-run exchanges extend the same special enrollment period.
CMS FAQ re: Transition from COBRA to Exchange Coverage
Lastly, on April 21, 2014 the Centers for Medicare and Medicaid Services (CMS) posted an online FAQ https://www.regtap.info/faq_printe.php?id=1496 asking whether someone who voluntarily drops COBRA coverage during an exchange open enrollment period may enroll in the exchange (and, if eligible, qualify for premium tax credits). CMS made clear that this transition is possible even for someone whose COBRA has not expired, and that enrollment on the exchange is permitted any time during the year for someone whose COBRA coverage has expired. The FAQ made it clear that a qualified beneficiary whose COBRA coverage had not yet expired could not enroll in exchange coverage outside the annual exchange open enrollment period. (The next exchange open enrollment period is from November 14, 2014 to February 15, 2015.)
Speculation as to COBRA’s Future
Against that background, some speculation as to COBRA’s future is warranted. COBRA continuation coverage, enacted in 1985, was in essence a legislative response to pricing and underwriting barriers to individual coverage that the Affordable Care Act has either eliminated (for instance, by banning pre-existing condition exclusions) or made less burdensome (for instance, through access to premium tax credits and cost sharing on the exchanges). Without question, the health exchanges are a “disruptive technology” to the COBRA model, but COBRA continuation coverage likely will remain in some demand until such time as individual exchange coverage is comparable, in terms of provider networks and in other respects, to current group coverage. That tipping point may not occur for some years, or even at all. What is likely in the short term is that COBRA’s already steep adverse selection rate will continue to climb, as continuation of group coverage becomes more and more about retaining access to a broad network of healthcare providers.