COBRA and The New Laws

[0b1kanobee]

So, moral of the story. Don't enroll in COBRA in the first place. Unless you just love complications.

1)So when you say don't let them enroll in COBRA, will they not have insurance then or will they since they have so many days to enroll in COBRA?
2) See the thing is even though they are really healthy, they don't want to have any liabilities associated with being uninsured. 3) Would they be better off taking a temporary health insurance plan until the non-exchange plan 1st effective start date?


THANKS A BUNCH FOR BOTH OF YOU CONTRIBUTING YOU KNOWLEDGE ON THE MATTER. Another agent who is fairly smart on the matter locally to me was not 100% on the answer so the information both of you are providing is enlightening. Thanks again.

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5. If you aren't subsidy eligible, why would you use the exchange?

A fellow agent I work with seems to think that there is no difference with the exception that if they became subsidy eligible through their income (I think they are self employed now so lets just say they make widgets and all of sudden their widget business was making what they thought it was gonna according to last few years) then at the end of the year they could recoup a subsidy hd they went through the exchange.

 

[houcoogster]

Bottomline common sense answer to COBRA situations that we run into in the future is this:
1. Don't take COBRA.
2. If you did, and want to back out and get a subsidy, it's complicated.
3. If it's not your current client, and this isn't your mess, it's probably not worth getting into the middle of it.

I didn't think the cobra part of the site was working. i just said no and clicked next. They got a subsidy. Then the next day she called and said she got a job they will be canceling it in 3 months. I was like oh that's great...Thanks!

 

[kgmom219]

I didn't think the cobra part of the site was working. i just said no and clicked next. They got a subsidy. Then the next day she called and said she got a job they will be canceling it in 3 months. I was like oh that's great...Thanks!

Jerks. Maybe the new job will have expensive dependent coverage and it will be cheaper to put the dependents on a individual plan!

 

[CMS]

If they term cobra in the middle of the term to get APTC. Will IRS recoup tax credits next year

 

[xrac]

If they term cobra in the middle of the term to get APTC. Will IRS recoup tax credits next year

All I can say is that I am glad Ann is willing to be on here and post her take on things.

 

[Ann H]

1)So when you say don't let them enroll in COBRA, will they not have insurance then or will they since they have so many days to enroll in COBRA?
2) See the thing is even though they are really healthy, they don't want to have any liabilities associated with being uninsured.
3) Would they be better off taking a temporary health insurance plan until the non-exchange plan 1st effective start date?

Well, my post was about the complications with enrolling in COBRA and how it affects subsidy eligibility. My post certainly wasn't suggesting that people should go without coverage! I'm sure you understood that.

However, there is no doubt about it that the timing issue is a beast. If you lose your job June 16th for instance, and therefore lose your insurance the last day of June, you are too late to apply for a 7/1 effective date. Do you take COBRA, or do you wing it through the COBRA election period? The next effective date is 8/1, unless you use a carrier that will do a 15th of the month effective date(like Assurant). That's 45 days of "winging it". Or you could take a temporary plan.

Maybe you'll take the safe and secure route and enroll in COBRA. If so, and it's past Open Enrollment, there is no SEP created if you drop COBRA.

It's a beast.

 

[HealthGuy]

Ann me thinks you just found another glitch in the law !

 

[Ann H]

All I can say is that I am glad Ann is willing to be on here and post her take on things.

Thank you Xrac.

This COBRA situation is complicated. And yes, it surely must be a glitch. This timing issue will apply to other employees too. If a regular employee ENROLLS IN their employer-sponsored plan, they have the same problem of being blocked from subsidies for the months in which they are enrolled in it. Let's look at that quote from IRS TD9590 again:

Section 36B(c)(2)(C)(iii) and the proposed regulations provide that an individual who enrolls in an eligible employer-sponsored plan is not eligible for the premium tax credit even if the plan is unaffordable or fails to offer minimum value. Commentators asked whether an individual who enrolls in an eligible employer-sponsored plan and then terminates coverage during the plan year is treated as eligible for minimum essential coverage under the plan for the entire plan year under this rule, even though the coverage is unaffordable or does not provide minimum value. Commentators similarly asked if individuals who enroll in continuation coverage and then disenroll from it later during the year are treated as eligible for minimum essential coverage for the entire year. In response to these comments, the final regulations clarify that an individual is treated as eligible for minimum essential coverage under an eligible employer-sponsored plan by reason of enrolling in the plan or in continuation coverage only for months the individual is enrolled in the coverage.

Continuation coverage. An individual who may enroll in continuation coverage required under Federal law or a State law that provides comparable continuation coverage is eligible for minimum essential coverage only for months that the individual is enrolled in the coverage​

So, that pretty much says it. If an employee (or COBRA participant) ENROLLS IN the employer-sponsored plan, they don't get a subsidy. That applies only for the months in which they are actually enrolled in it. It doesn't matter if the employer-sponsored plan or COBRA is not affordable. They enrolled in it. They are not eligible for subsidies for the months in which they enrolled in it.

So, this issue will hit more than just COBRA participants. You will find other people whose employer-sponsored plans are not affordable, but they won't get a subsidy because they actually ENROLLED IN the ER sponsored plan. And, since large groups (over 50 FTEs) are allowed to put in skinny MEC plans that make yesterday's mini-meds look rich, then we will see a lot of situations where people enrolled in their employer's plan and don't understand why they can't get a subsidy. We aren't seeing that too much now because the large group employer mandate was delayed, but we will.

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Another issue, by the way, is what if they dropped COBRA, but it was affordable and adequate. Are they trapped? Since they had enrolled in it, they were eligible to keep it. It is employer-sponsored. It is affordable and adequate. Can they get subsidies? This question hasn't been answered yet. I've read interpretations that see it both ways, but I haven't seen anything definitive. The example in the TD9590 was of an "unaffordable" plan, where the person enrolled in it, then terminated it. What happens if a person enrolls in COBRA and it met the "affordable" test as well as adequate? My feeling is that they might be trapped and not be eligible for subsidies, but honestly I have seen high-level professional interpretations that went both ways.

 

[houcoogster]

How can cobra be "affordable" when they don't have any income or just unemployment checks?

The couple i did had it since Oct. enrolled in the HIX plan for a Jan 1 effective. They dropped or just didn't pay the cobra bill for Jan premium. They might have to pay back the subsidy they got anyway because she got a job. I think I did the right thing for them because we didn't know when or if she was going to get a job. Either way the cobra plan was $300 a month more without any subsidy so they came out ahead. I'm not going to worry over this stuff anymore I'm not making anything on it and they are only going to keep it for 3 months .....total waste of my time. From now on when they say the C-word to me I'm just going to refer them to Mr. DT (dial tone).

 

[Ann H]

How can cobra be "affordable" when they don't have any income or just unemployment checks?

It can happen very easily. You have to remember that the subsidy is based on your entire 2014 income, not the amount of money you are making at this particular moment in time. Example: Family makes big bucks for 8 months of 2014. Let's say 700% of FPL. The breadwinner loses his job, and income goes down to zero. Are they eligible for a subsidy? Probably not. Total household MAGI income for 2014 will quite likely be over 400%.

By the way, unemployment income flows to MAGI too.