New DOL Directive Promises To Create COBRA Confusion

Corporate Synergies' Compliance Department experts

A new directive from the Department of Labor (DOL) regarding the Affordable Care Act (ACA) is almost sure to cause pain and confusion for employees who are fired or laid off in 2014 and beyond.

The directive was included in the DOL’s release of the long-awaited “model employee notice” concerning the Affordable Care Act’s public exchanges. Specifically, it stated that employers who terminate an employee must now give them the option of choosing COBRA to continue their coverage, or a second option of going into the exchange. On the surface this seems logical; what the directive will mean in practice is that a fired or laid off employee will now have to educate him or herself on the intricacies of health insurance at what is typically an emotional and frantic time. The employee will have to understand the level of coverage and cost of both COBRA and the exchange.

And that isn’t easy, particularly when you consider that ACA remains a mystery right now to even the most experienced group employee benefits managers. Worse, there’s deadline pressure for the employee – if they don’t make a choice within 60 days, they get neither, which would leave them uninsured.

Currently, COBRA is a fairly straightforward option that most terminated employees choose. However, in many circumstances it’s reasonable to think that the exchanges will provide a more flexible and/or more affordable option. But digging into the nooks and crannies of the various policy options to determine whether it’s a good fit for the employee and his or her family promises to be daunting.

For employers, there’s no obligation to assist the employee in weighing options and making a smart decision. Whether or not they choose to assist is yet another decision that employers and their HR staffs will have to make in regards to ACA.