With the COBRA subsidy running out for many people and a lot of confusion in general over health reform, your former employees may not understand what their best options are. They want to know things like whether or not they can continue their COBRA coverage without the subsidy, whether they can qualify for coverage on their own, or whether the government and health reform is going to make coverage more affordable for them without COBRA.

Employers can be of significant help to COBRA enrollees as they work to understand their options when transitioning off of COBRA. Here is some basic information designed to help you provide former employees with guidance during a tough transition.

Options Faced by Former Employees after COBRA

Those who have used up their 15 months of COBRA subsidy assistance may have the option to continue COBRA at their own expense for an additional three months, though many find it unaffordable. Whatever your former employee’s personal situation, when COBRA is no longer an option, they generally have five choices:

1) Join their spouse’s employer-based plan – If your former employee’s spouse recently got work with a company offering health insurance, it may be possible for them to be added to that policy as a dependent.

2) Purchase coverage on their own – If they’re relatively healthy, it may make sense for former employees to purchase coverage on their own, and health reform law provides some new consumer protections in 2010 if they do. For instance: it’s harder now for the health insurance company to cancel coverage after a member get sick; they may get better preventive care; and there won’t be any lifetime limits on the amount of money the insurance company will pay out for their medical bills. When purchasing coverage on their own, however, it is important to note that they can still be declined due to pre-existing medical conditions. The provision of health reform law that changes that won’t come into effect until 2014. But individual and family health insurance plans can cost substantially less than COBRA, though the coverage levels may differ somewhat. Former employees should work with a licensed agent like eHealthInsurance.com to get quotes from a broad selection of companies in their area to find the best match.

3) Consider short-term health insurance – If your former employee was recently hired for a new job but his or her benefits haven’t kicked in yet, or if they expect to have employer-sponsored coverage through a spouse in the next six months or so, a short-term health insurance plan might be a good choice. They need to know, however, that pre-existing medical conditions won’t be covered, nor will prescription drugs or preventive care. Most short-term plans only provide coverage in case of serious injury or hospitalization.

4) Know their HIPAA rights – This is really important for people with pre-existing medical conditions. HIPAA is a federal law that says that if they can show that they’ve maintained qualified health insurance coverage for a certain period of time without a gap of more than 62 days, they will automatically qualify for some type of continuous coverage depending on their State of residence. Whether through a state high risk pool, a carrier of last resort or certain plans offered by certain carriers, each state offers at least one guaranteed issue plan for persons protected by HIPAA. It may be expensive (comparable to paying your full COBRA premium without a federal subsidy, in many cases) but it’s a good option for those who might be declined for coverage elsewhere due to their medical history. Since there are so many variations based on a person’s State of residence, I recommend that people who want to learn more about their HIPAA rights to talk to a licensed agent or the non-profit Foundation for Health Coverage Education (www.coverageforall.org).

5) Look at government-sponsored options – Low-income individuals or persons with pre-existing medical conditions may also want to consider other government-sponsored health insurance options. For example, there are state high-risk pools available in most states and the federal government is strengthening these high risk pools beginning in the summer of 2010 as a result of health reform. Government-sponsored options may also include HIPP (not to be confused with “HIPAA”), which will pay your COBRA premiums in certain cases, and CHIP programs that provide health insurance coverage for children of families that meet specific income criteria. Since eligibility for these programs isn’t always clear, I recommend that people who can’t qualify for or afford coverage on their own contact the non-profit Foundation for Health Coverage Education (www.coverageforall.org) for help.
When Should I Reach out to Former COBRA Enrollees?

The federal COBRA subsidy was designed to provide workers who were laid off between September 1, 2008 and May 31, 2010 with up to 15 months of premium assistance. I recommend reaching out to employees 30 days prior to the date on which they will lose their subsidy.

It’s worth noting that June 1, 2010 marked the end of the eligibility period for newly laid off workers to benefit from the COBRA subsidy. Persons laid off after that date may still qualify for COBRA but they will have to pay the full monthly premiums out of pocket. Those who do enroll in COBRA may need help understanding their options after they exhaust their 18 months of unsubsidized COBRA coverage.

The following graphic may help identify the different scenarios your former employees may be facing:




Why Is It Important to Help Former Employees?

Compassion, first of all. It’s been a tough couple years for employees and employers alike. So many of us – or else our friends and relatives – have lost jobs. I think we all know that if we weren’t personally touched by job loss these past years, we’re lucky.

Employers are also benefited by going the extra mile to make sure their former employees understand their choices in times like this. If the economy picks up again, for example, you may want to hire some of those workers back. And you can save your HR department a lot of headaches by putting guidance like this together beforehand and communicating it to COBRA enrollees when the time comes.

Wendy Nice Barnes, Vice President of Human Resources, eHealthInsurance Services, Inc.