Much attention has been focused on the postponement of the Affordable Care Act’s employer mandate—the requirement that businesses with 50 or more employees provide them with health insurance or face significant fines, which the Obama Administration delayed for one year.
But largely lost in the furor have been the ways in which employers could potentially benefit from the ACA and the launch of the new public health insurance exchanges, starting six days from now on October 1.
Results from a survey of more than 100 large employers, released last month reveal that companies are looking to the online marketplaces to help them save on a variety of health-related benefit costs. These include benefit options for part-time and retried workers, as well as furloughed workers who currently rely on COBRA coverage.
“One of the strongest arguments for the Affordable Care Act has been that there are a number of people who historically have had little or no opportunities to buy affordable coverage,” Helen Darling, president and chief executive officer of the National Business Group on Health, which conducted the survey, said in a statement. “The exchanges specifically change that outlook and enable functional marketplaces all around the country in a way that we have never had. So it is not surprising that employers would see the exchanges as solutions for some groups.”
The savings on COBRA alone could total in the billions.
Because insurance under COBRA—short for the Consolidated Omnibus Budget Reconciliation Act of 1985—is no longer subsidized by their former employers, individuals who are often still unemployed must pay premiums in excess of $5,000 a year for the coverage. And since it’s so expensive, only people who know they’ll need the insurance tend to sign up.
But once they do, they are still covered under their former employer’s health plan, and the average COBRA member costs his former employer 54 percent more — or $3,800 —than the average active worker, according to a 2009 survey by newsletter Spencer’s Benefits Reports.
Spencer’s estimates that there were 4.8 million COBRA beneficiaries in 2008—the most recent year for which figures are available. Based on those figures, COBRA would have cost employers more than $10 billion that year, according to a Kaiser Health News report.
However, with the launch of the exchanges next month, many COBRA recipients will qualify for federal tax credits and subsidies, making insurance purchased through an exchange a far less costly alternative. As a result, the exchanges are expected to all but replace COBRA coverage.
“As soon as the law was passed, the question among employers and benefits people was: Is there still going to be a reason for COBRA?” Steve Wojcik, vice president of public policy for the National Business Group on Health told Kaiser Health News and the Chicago Tribune in an interview. Offered a choice between heavily subsidized coverage through the exchanges or paying full price under COBRA, he said, “most people are going to choose the exchange.”
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