September 23, 2013 – This KHN story was produced in collaboration with the Chicago Tribune.
Health-law provisions taking effect next year could save U.S. employers billions of dollars in expenses now paid for workers who continue medical coverage after they leave the company, benefits experts say.
Insurance marketplaces created by the Affordable Care Act are expected to all but replace COBRA coverage in which ex-employees and dependents can remain on the company plan if they pay the premiums.
“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?” said Steve Wojcik, vice president of public policy for the National Business Group on Health, an employer group. Offered a choice between heavily subsidized coverage in the health act’s insurance exchanges or paying full price under COBRA, he said, “most people are going to choose the exchange.”
The Consolidated Omnibus Budget Reconciliation Act of 1985, known as COBRA and intended to furnish coverage between jobs, is a burden for employers as well as participants.
Because company cost sharing usually ceases when workers depart, COBRA members pay premiums exceeding $5,000 per year for single-person coverage and more for families. But because it’s so expensive, only people who know they’ll use the insurance are likely to sign up.
That means participants are typically sicker than average and use half again as much in benefits as they pay in premiums, causing losses for large corporations that pay their own medical claims.
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