Can you drop your COBRA Coverage and enroll in exchange plans?

HR managers and individuals eligible for COBRA coverage need to pay attention to a recent change.


May 2, 2014 CMS issued a bulletin describing a special enrollment period in regard to COBRA qualified beneficiaries and enrollment in the Federal Marketplace plans. (For specific language from CMS questions and answers section see the following link.)


The issue: People who qualified for COBRA coverage during the Federal Marketplace enrollment period could request coverage on the Federal Marketplace instead of taking the COBRA coverage that was frequently much more expensive.


The problem:

A. COBRA notification processes created the potential for a gap in coverage to develop if the qualified beneficiary did not elect the COBRA coverage.

B. People who elected COBRA coverage and then decided to drop COBRA coverage and move to the Federal Marketplace plans could only do so during the “open enrollment period”. If the COBRA coverage was dropped outside the enrollment period these people were not allowed to then enroll in the Federal Marketplace. People who were not aware of this rule would then be left with no coverage until the next open enrollment.


The interim solution: on May 2, 2014 CMS issued a bulletin establishing a limited special enrollment period. Between May 2, 2014 and ending on July 1, 2014 individuals currently covered by COBRA benefits may voluntarily terminate their COBRA coverage and enroll in the qualified health plan of their choice through the Federal Marketplace.


HR managers need to be aware that new rules have been issued regarding COBRA notification. For example,  your COBRA notification now needs to carry clarification of the enrollment process and the rules surrounding it. You do not want to be issuing COBRA notifications that do not indicate that people not wishing to carry COBRA are only allowed to choose federal marketplace plans during the official open enrollment period.


In addition, it would be a very good idea for you to check with your COBRA administrators and HR specialists regarding notifications you need to produce now in regard to the May 2, 2014 CMS notification.


If you have any questions, give us a call, 602-381-9900.

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