Why You Should Offer Your Laid Off Workers An Alternative to COBRA
by Steve Patrizi, on April 8, 2020
Laid off workers not only need to find new sources of income, they’re also going to lose important benefits, like health insurance. For many, COBRA can be unsustainably expensive, especially during a market where it may take 6-12 months to find new employer-sponsored benefits. Fortunately, you can offer your laid off workers a more affordable alternative.
If you had more than 20 employees in the previous calendar year, then generally you need to offer COBRA to your terminated employees. COBRA–which stands for the Consolidated Omnibus Budget Reconciliation Act–allows your former employees to enroll in the same group health insurance plan you provided before you released them, with the caveat being that they pay for the entire cost of the plan themselves along with an additional 2% administration fee.
COBRA is a big expense for the newly unemployed
For many workers, that could mean paying 4-5 times as much as they had been paying for the same health insurance plan when they were still employed, since employers typically cover 70-80% of plan premium costs. According to the 2019 Kaiser Family Foundation Employer Health Benefits Survey, the average annual premium for single coverage is $7,188 and $20,576 for family coverage–all of which would need to be paid entirely by an employee who now finds themselves without income in a market where it may take several months to find new employment.
The individual market: an affordable, and perhaps better, alternative
While you’re legally required to provide COBRA, you may want to offer your laid off workers an alternative alongside it: the Affordable Care Act individual marketplace. It’s very possible that your former employees may find ACA health insurance plans that suit their needs at lower costs. According to the Center for Medicare and Medicaid Services, the average annual premium for the 2020 ACA benchmark plan was $4,656 for single coverage, or 35% less than the average employer-sponsored plan. Moreover, almost 90% of individuals enrolled in ACA plans qualify for financial assistance in the form of premium tax credits which can greatly lower the out-of-pocket costs for an employee. In 2019, 40% of individuals using Stride to find health insurance paid less than $25 per month for their health insurance, in large part because of premium tax credits.
These plans all meet minimum essential coverage requirements and are guaranteed issue plans, meaning an applicant’s medical history is not a factor in their eligibility. Normally, individuals can only purchase ACA plans during each year’s Open Enrollment Period, but losing employer-sponsored health insurance due to loss of employment is considered a Qualifying Life Event and triggers a Special Enrollment Period. That means all of your terminated employees who just lost health insurance can enroll on the individual market outside of Open Enrollment.
It’s important to keep in mind that your terminated employees have 60 days to enroll in COBRA or an ACA Plan. Once they enroll in COBRA, they’re no longer eligible for the Special Enrollment Period. Since COBRA is retroactive for 60 days, it could very well be in your employees’ best interests to see what their ACA options are before jumping right into COBRA.
Your Own Co-Branded Health Insurance Marketplace
While you can’t address all of the issues your laid off employees must now face, you can make it easier for them to compare health insurance plans, see if they qualify for premium tax credits to lower the cost of their health insurance, and complete their enrollment process if they decide on an ACA plan instead of COBRA.
Stride’s Co-Branded Health Insurance Portals come with everything you need to help your former employees find the best ACA plan at the lowest possible price with year-round support to help them put their new plan to work. Here’s what you get with every Stride Health Insurance Portal–all at no cost to you:
- Your brand elements including logo, imagery & terminology
- All of the plans on the government exchanges at the lowest possible prices
- Email templates to let your workers know about your Portal
- Year-round phone and email support for your workers
Providing your former employees with an alternative to COBRA will show them you’re doing everything possible to help them find their footing in an uncertain market–an important investment in your long-term employer brand. Get Started for Free.