COBRA coverage subsidy ends soon for many
When Paul Carroll lost his job in January, he and his wife, Kate, had a difficult, expensive choice: Do they keep their health insurance through his former employer, even though it would mean bearing the full cost of the coverage?
The federal government eased the burden a month later, providing subsidies – amounting to two-thirds of the Carrolls' premiums – intended to quell the sting of sudden unemployment for millions of Americans.
But the subsidies end Monday for the Carrolls and thousands of others across the country, among the first wave of laid-off workers to lose the government aid.
For the Carrolls, who are now self-employed, it means $1,200 of their monthly income.
"It's obviously a considerable chunk of what we're living on as we're building our businesses," said Paul Carroll, 58.
But he considers himself fortunate to have been able to set aside financial reserves to help cover unexpected medical costs. Still, "it's a challenge," he said.
"I don't think you really appreciate the coverage and realize where the chinks in the armor are until you're faced with major challenges," he said.
It's unclear when or whether Congress will address the subsidy expiration with specific legislation or as part of a major jobs bill.
With unemployment on an upward track, the Obama administration, with the approval of Congress, acted to help millions of Americans who had lost their jobs since September 2008.
As part of the federal stimulus package, Congress authorized $25 billion to provide subsidies for about 7 million laid-off workers so they can remain on health plans provided by their employers under the Consolidated Omnibus Budget Reconciliation Act, better known as COBRA.
Under the program, laid-off workers pay 35 percent of premiums and the government reimburses employers for the remaining 65 percent.
When workers leave their jobs, they typically shoulder the entire cost of premiums themselves, an often expensive proposition for folks trying to subsist on unemployment checks.
On average, the typical family pays $1,069 a month to continue employer-sponsored health coverage, according to Families USA, a health advocacy group based in Washington, D.C.
COBRA subsidies last nine months, and that time runs out at the end of the month – Monday – for the program's first enrollees, if congressional action is not taken.
With health care overhaul a burning issue in Washington, some health care advocates say it is not a good time to increase the country's number of uninsured.
"To the extent that we are trying to create a health care system where we are trying to get everybody in, it makes no sense to let people lose coverage," said Anthony Wright, executive director of Health Access California, an advocacy group.
"Unfortunately in this system, those who get unemployed also get uninsured. It's an awful double whammy," Wright said.
Even with the subsidies, some have found COBRA payments unaffordable. Less than 10 percent of the newly unemployed typically sign up for COBRA. With the subsidies, however, the percentage has nearly doubled, according to a study by Hewitt Associates.
While some get coverage through spouses or find less-expensive private insurance, more than half of those who lose their jobs go uninsured, Wright said.
Even with the federal subsidy, COBRA "is still expensive, but it's a lot better than paying a hundred percent of the premium when there is no income coming in through the door," Wright said.
The federal subsidy is also running out for Miriam Marchevsky.
The 36-year-old Oakland woman lost her job last fall and extended her health coverage through COBRA. She's found a new job that does not offer the benefit of health insurance, which she needs because she is at high risk for ovarian cancer, she said.
Now without the subsidy, her monthly premiums will be $530 a month – an amount she will pay. "I don't have an option," because of pre-existing health conditions, she said. If she drops her policy now, "it will be impossible to get another one."
Some Senate Democrats want not only to extend the subsidy to 15 months and push the expiration date to next June, but also want to boost it to 75 percent. A similar measure was introduced in the House.
If approved, that would be welcome news for Andrew Bradley, 27, of Roseville, who was laid off in September from a Sacramento public relations firm. His COBRA subsidy cuts his monthly health care premiums from $350 to $120. He hopes he'll find another job before his subsidy runs out in several months, because there's no way he would be able to afford the comprehensive coverage while unemployed.
"I'd probably drop my comprehensive coverage and only pay for insurance that covers me if something really catastrophic happens," he said. "I'm fairly healthy and I think it would be OK."
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