ACA, COBRA to play roles in ensuring health coverage after job loss

Most people (72%) who lost their health insurance when they lost their jobs during the last two years say that they skipped necessary health care or did not fill prescriptions because of their cost, according to a new report from the Commonwealth Fund. The same proportion is also struggling with medical bills or medical debt, compared to about half (49%) who lost jobs but not their health insurance.

According to the report, six in 10 working Americans rely on health insurance obtained through their employer, and when an estimated 15 million working-age adults lost their jobs and their employer-based insurance between 2008 and 2010, 9 million became uninsured. Though COBRA is an option, it’s a costly option and one not often used, says the report, noting that, because unemployed workers must pay the full premium, few people elect to continue their coverage through COBRA.

The American Recovery and Reinvestment Act of 2009 substantially offset the cost of COBRA for some unemployed workers by covering 65 percent of their COBRA premiums. Although several studies have found that COBRA enrollment among eligible individuals increased after the subsidies went into effect, helping millions of people who lost their jobs stay insured, these subsidies have not been offered to newly laid-off workers since 2010, the report points out.

The individual insurance market is also not a viable option for those who have lost a job and health insurance, the report suggests. According to the report, 60 percent of people who shopped for individual insurance policies over the last three years were unable to find a plan they could afford, and 35 percent were turned down by an insurer, charged more because of their health status, or had a specific health problem excluded from their coverage.

Impact of ACA. The report finds that once the major coverage provisions of the Affordable Care Act are implemented in 2014, job loss will not automatically mean going without health insurance, because the newly unemployed will have greatly expanded health insurance options, including subsidies to purchase insurance through exchanges, and expanded access to Medicaid coverage.

"Currently, for a majority of Americans, losing a job also means losing health insurance," said Commonwealth Fund Vice President and report co-author Sara Collins. "To make matters worse, once you are unemployed and uninsured, it's nearly impossible to afford COBRA or buy an individual policy. However, when it is fully implemented in 2014, the Affordable Care Act will usher in a new era for the unemployed, who will have a variety of options for comprehensive and affordable health insurance."

How health reform helps. Some early health reform provisions, including allowing young adults up to age 26 to remain on their parents' health insurance, and the creation of pre-existing condition insurance plans in all 50 states and the District of Columbia, are already helping some of the unemployed and uninsured, the Commonwealth report suggests.

However, the reforms that will have the most significant impact will take effect in 2014 when Medicaid is substantially expanded to cover single adults earning up to $14,484 a year and families of four making up to $29,726 a year. In addition sliding scale premium tax credits will be available for single adults earning up to $43,560 and families of four making up to $89,400 to purchase private policies through new state insurance exchanges. People who buy health insurance through the exchanges will enjoy new consumer protections that will assure they won't have to pay high premiums or be denied insurance because of their health status.

COBRA’s role to continue. Despite the new protections, the report authors say that there will still be a role for COBRA in 2014, to reduce the burden switching insurance plans places on families, and to curb federal and state administrative costs associated with changing plans to fill short gaps in coverage.

Between now and 2014, the report’s authors recommend that policy makers continue the current protections in place for unemployed Americans, including extending jobless benefits and re-establishing the COBRA subsidies that helped millions of Americans who lost their jobs during the recession keep their health insurance coverage.

HRAs receive exemption from annual limit restrictions in health reform

Health reimbursement arrangements (HRAs) have been exempted from the annual limit restrictions in the Patient Protection and Affordable Care Act and do not need to apply individually for waivers or waiver extensions from the restrictions, according to August 19, 2011, guidance from the Center for Consumer Information & Insurance Oversight (CCIIO).

In June, CCIIO announced that limited benefit plans have until September 22, 2011, to apply for or renew a temporary waiver from the annual limit restrictions. The CCIIO already has granted waivers to more than 1,500 plans.

In the most recent guidance, CCIIO notes that "all HRAs set limits on the amount that can be spent and, we believe, those limits would always be less than the applicable restricted annual limit amounts. Accordingly, applying the restrictions on annual limits ... to HRAs would result in a significant decrease in access to HRA benefits. Therefore, this guidance exempts as a class all HRAs that are subject to the requirements of [ACA Sec. 2711] and that were in effect prior to September 23, 2010 from having to apply individually for an annual limit waiver for plan years beginning on or after September 23, 2010 but before January 1, 2014."

If an employer that maintains an HRA also maintains other coverage, whether or not that coverage is integrated with the HRA, that other coverage must meet the annual limit requirements or obtain a waiver.

An HRA that is exempt from applying for an annual limit waiver still must comply with the record retention and Annual Notice requirements to participants and subscribers set forth in the supplemental guidance issued June. For instructions on these requirements for HRAs, please refer to the "Technical Instructions for the Waiver Extension and Waiver Application Process."

Waivers granted. By the end of July, the Center for Consumer Information and Insurance Oversight (CCIIO) had provided 1,472 one-year waivers and 106 three-year waivers to organizations covering more than 3.4 million employees. By the end of June, 1,471 plans had received waivers.

By type of applicant, the waivers granted so far are, as follows:

• self-insured employers (631);


• health reimbursement arrangements (491);


• multi-employer plans (378);


• health insurance issuers (41);


• non-Taft Hartley union plans (30);


• state-mandated policies (5); and


• association plans (2).

For more information. A comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, just click here.

Employers Continue To Plan For Health Reform Effects

Employers are well aware of the significant changes the Patient Protection and Affordable Care Act will make on their health care plans, and two recent national benefit surveys provide some insight into how employers are responding.

A recent Towers Watson survey acknoweldges that one of the driving forces behind significant health care design changes and cost shifting is health care reform. A majority of employers (53%) are confident that health care reform will be implemented within the anticipated timeline, but 70% of employers are skeptical that health insurance Exchanges will provide a viable alternative to employer-sponsored coverage for active employees in 2014 or 2015.

On top of that uncertainty, 56% of employers believe that they will trigger the excise tax on high cost insurance by 2018. Yet more than three-quarters believe that health care benefits will continue to be a key component of their overall employee value proposition beyond 2014.

Specifically, between now and 2014, employers are planning or considering the following actions, according to Towers Watson:

Increase offering of account-based health plans (health savings accounts (HSAs) and health reimbursement arrangments (HRAs)): 17% intend to add this plan design in 2013 or 2014, which would result in nearly three in four [74%] employers offering an ABHP)

Use value-based benefit designs (49%): Encouraged in the ACA, value-based design is the explicit use of plan incentives to encourage enrollee adoption and appropriate use of high-value services, healthy lifestyles and use of high-performance providers that adhere to evidence-based treatment guidelines

Increase use of preferred networks (58%).

BUSINESS GROUP SURVEY

A recent survey by the National Business Group on Health found that employers had made or were planning to makethe following changes in response to the ACA:

Annual benefit limits. The majority of employers (59%) are not making any changes for 2012 (full restrictions on benefit limits will be banned in 2014). However, 27% said they plan to make changes to annual limits for preventive and wellness services. Another 14% said they will make changes to annual limits for mental health and substance abuse services.

Grandfather status. Twenty-three percent will have at least one benefit option that keeps its grandfather status in 2012, while 19% will drop its grandfather status. Almost half (49%) did not have any benefit option in grandfather status this year.

Default plan for new hires. Twenty-seven percent plan to use their least costly health plan for employees as their default plan for new full-time hires as required by the ACA.

Additional surveys on employer responses to the ACA can be found here and here.

A comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, just click here.