COBRA or the ACA? cont.

A while back, I put up a pair of posts examining the factors to be weighed by people faced with a choice between continuing an employer-sponsored health plan via COBRA or buying a health plan on an ACA exchange.

Once case involved a couple, ages 62 and 57, navigating a simultaneous retirement and divorce. As both are subsidy-eligible, an ACA plan yields big savings. The other involved a single New York-based 31 year-old who's been continuing good coverage via COBRA and is at the edge of subsidy eligibility. An ACA plan would slash his monthly fee considerably, even without subsidy, while offering more restrictive coverage.

COBRA is likely to be the better choice, however, for older insurance-seekers who are not eligible for subsidies.  Employer-sponsored insurance is usually not age-rated -- that is, it doesn't cost more for older plan members -- and the coverage it offers generally has a higher actuarial value than the ACA's benchmark silver plans. ACA plans are more modestly age-rated than plans in the pre-ACA individual market -- the ratio of oldest to youngest is capped at 3-to-1, versus the 5-to-1 cap that most states allowed pre-ACA. Still, many older buyers can leverage the lack of age rating in their ESI to get better coverage for the same price than on the exchanges.


I spoke to a married 60 year-old in Massachusetts, let's call him Carl, whose wife, 56, recently quit her job after 32 years.  The couple weighed COBRA first against plans on the pre-ACA Massachusetts exchange (remember, Massachusetts enacted a health insurance system in 2006 that served as a template for the ACA) and then, after October, on Massachusetts' ACA exchange. An email from Carl outlines the choice:

The COBRA policy is a pretty good Blue Cross Blue Shield with a good network of providers and we also had Delta Dental included for a cost around $950 a month. The alternatives, prior to 2014 started at around $1050 without dental.  After the ACA there were policies that were as low as $750, with a number of choices equal to or less than the $950, but not including dental. Some of those had high "co-insurance" payments and some had more limited networks. I would have to do some research to find a policy equivalent to what we had, but it seems that it would cost around $1200 or $1300.

The ACA, then, could lower the couple's premium, but the ESI accessed through COBRA provides better coverage than an ACA plan of comparable cost. Carl has pre-existing conditions that make the higher premiums with better coverage a better bargain for the couple.

Carl's wife has found a new job, which will soon render the choice moot. That highlights an often-obscured fact about the ACA private insurance marketplaces: most people who access them will do so short-term. That has always been the case for the individual market, in which, according to one study, just 17 percent of participants keep their plan for as long as two years. By offering subsidized comprehensive coverage, the ACA may lengthen the term time for some while also increasing the proportion of Americans accessing insurance in the individual market. But for most people who access that market, it will remain a stopgap.