Brannen in Brief

Lawmakers Explore COBRA Changes

Laurie Brannen January 15th, 2009

Due to the continuing climb in unemployment numbers and the attendant increase in the loss of health care benefits, lawmakers are considering changes in COBRA that could result in subsidization of costs and, less likely, an extension of eligibility beyond the usual 18 months. But while insurance policy makers view COBRA changes as a possible temporary solution for workers who suddenly find themselves uninsured, some observers doubt that it would be much of a panacea for the majority of the newly unemployed — and it could result in higher costs for employers.

While most details of the proposal Congress is considering remain unknown to the public, extending the eligibility period appears to be off the table; the rationale is that COBRA is so expensive that the majority of people who are eligible can’t afford it. According to Families USA, a consumer health care advocacy group, the average national premium costs for family COBRA coverage eat up almost 84 percent of average unemployment benefits. Few people who qualify for COBRA actually elect coverage, but that could be changing if Baby Boomers, who often have trouble finding more affordable health insurance in the open marketplace, decide to bite the bullet with COBRA.

This could spell bad news for employers who have implemented mass layoffs. Although companies can set the COBRA premium at 102 percent of the cost of coverage, there is evidence that people who enroll in COBRA tend to use more medical services than employees; premiums often don’t cover costs. According to a Business Insurance report, for every dollar of COBRA premium, employers pay about $1.50 in claims.

Subsidization of COBRA premiums or an expansion of Medicaid are more likely scenarios. The government has subsidized COBRA costs in the past when unemployment numbers surged. According to the report, under a 2002 trade law, people who lose their jobs due to foreign competition or people ages 55 to 64 who are enrolled in pension plans taken over by the Pension Benefit Guaranty Corp., are eligible for a tax credit to pay 65 percent of their COBRA premiums.

As layoffs continue, it’s likely that the new administration will move quickly on this issue. Benefits departments should keep a close watch as developments unfold.

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4 Comments to “Lawmakers Explore COBRA Changes”

BF Reader Says:

February 11th, 2009 at 11:56 am

extension of Cobra

I am 59 years old and in the last few months of my 18 month Cobra insurance coverage. It is almost impossible to get an individual insurance policy of any sort through the major carriers. Any excuse is used to deny coverage. It appears that we will be forced into the California HIPAA pool which requires my wife and me to pay premiums three times my Cobra amount. All I want is major medical coverage to fill the gap between now and Medicare so that I do not put my retirement funds at risk. I am willing to pay the reasonable cost!
BF Reader Says:

February 11th, 2009 at 11:57 am

COBRA is a joke

We are financing hundreds of Banks and Financial institutions through various stimulus packages. These employers are layoff hundreds of thousands employees and the government (note the lower case G) is trying to appease these companies by not changing the COBRA rules.

Do we really think people can afford pay 102 percent of the cost of this insurance?.
Do we really think the economy will turn around in 18 months?

We don’t need socialized medicine, we need low cost medical insurance. Its time for Barack, Pelosi, Hillary, Kennedy and all the democrats who campaigned on this issue to put up or step down.

Karl
BF Reader Says:

February 11th, 2009 at 11:58 am

Universal Health Care

It has taken years to get in this mess, and the last 8 years really added to the mess, so I think we should give the new administration longer than 2 weeks to make substantive changes before we ask them to step down. Unlike you, I think we do need universal health care. Most other industrialized countries have this type of health care so we do not have to reinvent the wheel. Health care should not be a for profit business. Everything does not have to be about making money.
BF Reader Says:

February 11th, 2009 at 11:58 am

COBRA is a joke?

Karl: The reason COBRA premiums are high is not becuase someone arbitrarily decided to fleece consumers. It’s because the cost of medicine is exceptionally high…as noted in the article, COBRA membes typically have claims that are 150% of the COBRA premiums.

The problem, rather, is a combination of the poor health of the American people (obesity, smoking, diabetes) combined with an inefficient delivery system that insulates most people from the true cost of health care (until COBRA comes around).

Each of us has the responsibility for our own health. We need to stop looking for some magic “wealth redistibuttion” bullet from Barack Obama, and back meaningful changes that will lower the disease burden in this country. We can control this!