How the COBRA Subsidy Can Boost Individual Sales

In a recent post, we provided details about the new COBRA and State Continuation subsidy under the American Rescue Plan Act. If you missed it, the subsidy pays 100% of the COBRA or state mini-COBRA premium between April 1 and September 30 for COBRA/mini-COBRA eligible employees and covered family members who’ve lost their group coverage due to a reduction in work hours or an involuntary loss of employment. Click here to read the article.

At the end of the piece, we provided a teaser for today’s post: 

In an upcoming post, we’ll share an idea for agents who sell individual products about how they can use the COBRA subsidy as a great marketing tool. Hint: a lot of Assistance Eligible Individuals will lose their subsidy September 30 and may be looking for subsidized individual coverage.

Here’s what we wanted to tell you…

People with individual coverage can take the COBRA subsidy

First, you may currently have some individual clients who actually qualify for the COBRA subsidy because they were laid off or had their hours reduced during the COVID pandemic. If so, those individuals may want to drop their individual plan and sign up for COBRA; they could qualify for fully-subsidized coverage, potentially through the end of September.

Here’s Q&A 18 from the Department of Labor’s Frequently Asked Questions Page:

Q18: I am currently enrolled in individual market health insurance coverage, but I am potentially an Assistance Eligible Individual. Can I switch to COBRA continuation coverage with premium assistance?

• Yes, Potential Assistance Eligible Individuals can use the election period to change from individual market health insurance coverage (that they got either through a Health Insurance Marketplace®, such as through HealthCare.gov, or outside of the Marketplace) to COBRA continuation coverage with premium assistance. 
• Additionally, you may apply for and, if eligible enroll in Medicaid at any time. If you elect to enroll in COBRA continuation coverage with premium assistance, you will no longer be eligible for a premium tax credit, or advance payments of the premium tax credit, for Marketplace coverage you otherwise would qualify for during this premium assistance period. 
• You must contact the Marketplace to let them know that you’ve enrolled in other minimum essential coverage or you may have to repay some or all of the advance payments of the premium tax credit made on your behalf during the period you were enrolled in both COBRA continuation coverage and Marketplace coverage. This repayment would be required when filing your income tax return for 2021.

We know what you’re thinking

If people leave the individual market and sign up for COBRA, I’m going to lose clients, not gain clients!! Bear with us.

Yes, the ability for an individual to leave a heavily subsidized individual plan in favor of an even more heavily subsidized group continuation policy could certainly cost you some clients on a short-term basis (assuming you are not the agent on the group health plan). But keep in mind that this decision will not be right for everyone. Some clients might have better coverage under the individual policy, especially if they also qualify for a cost-sharing reduction in the individual marketplace. Also, if an individual has already met some or all of his or her deductible on the individual plan, this will not carry over to the group policy and could certainly impact the decision. Some of the things individuals should consider are addressed in Q&A 20.

COBRA is only short-term

The other thing to keep in mind is that the subsidy only lasts, at most, for six months—until September 30, 2021. And it can end earlier if the continuation period ends prior to September 30. Remember, the subsidy does not extend the term of COBRA or state continuation.

That, of course, means that anyone who chooses to take advantage of the subsidy will need a health insurance solution sometime between now and the end of September. Yes, some people will simply choose to continue their COBRA or state continuation policy, paying full price after the subsidy ends, but that is only an option until the end of their COBRA/mini-COBRA eligibility period. Others would do much better to sign up for coverage in the individual market once the subsidy ends and take advantage of a premium tax credit.

The good news—for both individuals and agents—is that people may have a special enrollment opportunity to sign up for coverage in the marketplace when their subsidy ends. 

Here’s Q&A 21 from the Department of Labor’s Frequently Asked Questions Page:

Q21: Can I qualify for a special enrollment period (SEP) to enroll in individual market health insurance coverage, such as through a Health Insurance Marketplace®, when my COBRA premium assistance ends on September 30? What about if my COBRA continuation coverage ends sooner than that?

• When your COBRA premium assistance ends, you may be eligible for a SEP to enroll in coverage through a Health Insurance Marketplace®, or to enroll in individual health insurance coverage outside of the Marketplace. 
• You may also qualify for a SEP when you reach the end of your maximum COBRA coverage period.  For more information about this SEP, see: https://www.healthcare.gov/unemployed/cobra-coverage/.

The Opportunity for Brokers

At this point, the opportunity should be clear. Over the next few months, a lot of the people who lost their health coverage during the COVID-19 national emergency will be in need of individual health insurance—and you sell individual health insurance. 

So how do you find these individuals? There are a number of ways:

• If you also sell group health insurance, that’s a good place to start. Be sure to reach out to anyone who’s losing their COBRA or continuation subsidy over the next few months to let them know you can help them get (potentially subsidized) individual coverage.
• It would also be a good idea to reach out to any third-party administrators you have a relationship with to see if they’d be willing to team up and share your information with any COBRA or continuation participants who are taking advantage of the subsidy. 
• Of course, most TPAs might be reluctant to share your information since they already have a relationship with the broker who sent them the COBRA administration business. So, instead, you might ask the TPA for an introduction to those brokers to see if they sell individual health insurance. If not, perhaps they would team up with you to help individuals who are losing their subsidy on or before September 30. You could also visit with any other group brokers you know with the same offer.
• And, last but not least, you could always run ads or try to get your message out there through talk radio shows, news stories, etc. If you’re not already hearing about the COBRA subsidies and special enrollment period in the individual market through the media outlets in your area, perhaps you could bring it to their attention and be the expert that they interview for the story. There’s nothing like free publicity.

Normally, agents only have a six-week period at the end of the year to sell individual plans. Thanks to the COVID SEP that runs through August 15 and the potentially new SEP when the COBRA subsidy ends, 2021 could be a huge year for individual sales. We hope you’re taking advantage of it.