Health insurance exchanges under the Patient Protection and Affordable Care Act may pose a threat to COBRA.
The observation emerged during a session at the MetLife's 9th annual National Benefits Symposium, just a week shy of COBRA's 25th anniversary.
Most employers "are not going to make a decision about whether they are going to play or pay until they see how successful the health exchanges are in creating a viable market where employees will be able to go and obtain coverage," said American Benefits Council President James A. Klein, whose organization co-sponsored the MetLife event, held on March 28.
PPACA requires states and the federal government to create virtual marketplaces that permit individuals and eligible employers to purchase health insurance. These health insurance exchanges are scheduled to open for business in 2014, and in 2017, many states will open up their exchanges for large employers with more than 100 workers.
"Many businesses, especially multi-state employers, are beginning to look at the health insurance exchanges as the logical place to bridge coverage for early retirees who are not eligible for Medicare," Klein added.
Equally important, the health insurance exchanges might represent a reason for repealing COBRA, "because clearly the exchange would be a better deal for your former employees. Rather than paying you 102% for a company's gold and platinum health plan, it is probably financially better to go into the exchange and buy a bronze plan," he explained.
"If the individual is a former employee because he or she is unemployed, then he or she may be eligible for a PPACA subsidy to boot, so there is a policy argument to make that COBRA has simply outlasted it usefulness under a scenario of a successful health exchange," he asserted.
COBRA anniversary commemorated
In a statement on April 7 to commemorate the anniversary, Secretary of Labor Hilda L. Solis said: "For 25 years, COBRA has been an essential safety net for those workers who play by the rules, yet still find themselves weathering difficult times. It ensures that they can continue their health coverage while getting back on their feet."
The quarter-century-old law "gives workers a means of maintaining coverage by group health insurance plans even when faced with such challenging life events as job loss, divorce or the death of a spouse," she added. In 2009, the American Recovery and Reinvestment Act granted a 65% COBRA premium for workers who lost their jobs due the recession and slow economic recovery.
During the recession and the slow economic recovery, American workers routinely heard that they needed to "do more with less." And they did. Productivity gains by U.S. employers always were held up as a bright spot in the down economy.
Research unveiled by MetLife suggests that those gains may have come at the expense of employee loyalty. Only 47% of employees say they feel very strong loyalty to their employer, a drop from 59% just three years ago.
Unfortunately, some employers have an exaggerated sense of employee loyalty. In the fourth quarter of 2010, 51% of surveyed employers report that their workers have very strong loyalty to them. However, 36% of employees plan on working for a different employer in the next 12 months.
"Worker loyalty has been slowly ebbing over the last several years, and it is important that employers take action to turn the tide around," said Anthony J. Nugent, executive vice president of U.S. business at MetLife. "The short-term gains employers realized from greater productivity appear to be short-lived and now pose bottom-line challenges as key talent considers other employment opportunities that have arisen as a result of the improving economy."
He added: "There is no doubt that the rebounding economy will bring more opportunities for employees, especially the high performers. A well-architected benefits offering will play an increasingly important role in retaining employees and positioning organizations for future growth."
Holding steady on objectives
Meanwhile, the data in MetLife's ninth annual "Study of Employee Benefit Trends: A Blueprint for the New Benefits Economy" show employers are holding steady to their benefits objectives, which include controlling health and welfare benefit costs, retaining employees and increasing employee productivity. Being delusional about employee loyalty may sabotage employers' efforts to achieve benefits objectives.
"Employers need to look at their benefits offerings differently - through a new, holistic lens - in order to maximize their effectiveness as a retention tool for their unique workforce while meeting other business objectives," said Dr. Ronald S. Leopold, MetLife vice president of U.S. business.
Benefits satisfaction still strengthens employee loyalty. Employees who expressed a high satisfaction level with benefits programs were about three times as likely to report feeling loyal to their employers (71%), compared to those who express dissatisfaction with benefits programs (25%).
This erosion of employee loyalty puts employers' retention efforts at risk as the nation emerges from the recession and job mobility returns, said Leopold.
MetLife also found that employee loyalty was driven by salary and wages, retirement benefits (64%), and nonmedical benefits such as dental, disability and life insurance (59%).
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