How Marketplace over COBRA coverage helps the employer and employee

How-Marketplace-over-Cobra

If you’re an employer who offers health insurance plans to your employees, then you might wonder how the Marketplace, designed primarily for people without coverage through their jobs, can benefit you. It’s likely that you are like the majority of employers and are required to offer continuation of group health coverage under the Consolidated Omnibus Budget Reconciliation Act, more commonly recognized as COBRA. If this is the case, then the availability of the Health Insurance Marketplace helps both you and your terminated employees.

COBRA Costs From an Employer’s Perspective

Under COBRA, the majority of terminated employees must be given the option to keep, for a limited time, the group health insurance coverage available to them while they were employed. Though the former employees are typically responsible for the entire monthly premium, plus a 2 percent administration fee, the potential costs of COBRA are considerable.

  • Overall COBRA claims amount to 50 percent more than the premium paid and are likely to cost significantly more than active employees. The average COBRA enrollees are older, report poorer health and are more likely to have multiple chronic conditions than people insured through a current job.
  • The potential amount of future claims becomes a liability on the company’s balance sheet.
  • Accurately forecasting cash flow presents challenges since so many variables are uncertain. Terminated employees have 60 days to opt for COBRA coverage, can enroll additional qualified family members, might elect coverage retroactively and could extend coverage in some cases beyond the typical duration of benefits, which lasts for 18 to 36 months.

Marketplace Savings From an Employee’s Point of View

In 2015, the average annual premium was $6,251 and $17,545 for single and family coverage, respectively. Employers contribute about 70 to 80 percent of that premium for covered workers. Former employees are not provided this benefit, and if they elect COBRA coverage they will pay the full price. Contrast this to the Marketplace, where former employees might be eligible to receive low- or no-cost coverage via government tax credits, significantly lowering the monthly premium price. The majority of people who purchase a Marketplace plan pay less than $100 monthly. For many, a Marketplace plan is more affordable than COBRA, where the former worker would pay over five times more.

As more people choose to purchase one of the more affordable Marketplace insurance plans, employers win by saving on the number of COBRA participants and their potential claims, and employees win by saving significantly on monthly costs while still enjoying the benefits of health insurance and avoiding tax penalty for lack of coverage.

If you are an employee and want a better understanding of Marketplace COBRA alternatives, call or make an appointment with a HealthSherpa Consumer Advocate.  If you are an employer, we welcome the chance to learn more about your employees and see how we can help support your population.

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