COBRA subsidy starts expiring as Congress grapples with extension

Kaiser Health NewsJune 4, 2010 

WASHINGTON — Howard Kornblum has been watching every penny for the past 15 months, and it's about to get worse.

After being laid off from his job as a consulting director in Michigan, he took advantage in March 2009 of a federal subsidy to help pay for health insurance. With the government picking up 65 percent of the tab, Kornblum's share of the premiums was $236 a month.

On Tuesday, the subsidy expired for the first people who got it, and Kornblum's benefits ended Friday.

Under the federal COBRA law, a laid-off worker can stay on his employer's plan for 18 months, but the employee must pay the entire cost of the coverage. The COBRA subsidy — initially part of the 2009 stimulus package — provided the funding for 15 months for people who lost their jobs.

A U.S. Treasury study found that up to a third of eligible unemployed workers took advantage of the benefit. The average cost of a family plan is more than $13,000 annually — not affordable on an unemployment check. The Obama administration estimates that about 500,000 workers each month since March 2009 who lost their jobs were eligible for the COBRA subsidy, said Sandra Salstrom, a Treasury spokeswoman.

Although he's lost his subsidy, Kornblum, 54, still has the option to continue COBRA health insurance for three more months. With shoulder surgery looming, he'll now be paying nearly $700-a-month premiums to continue the coverage.

"I have to. I don't have a choice right now," Kornblum said. After that, he hopes to have found a job, he said, but if he hasn't, he'll buy health insurance on the individual market, even though it costs more.

Some might consider Kornblum one of the lucky ones. Starting this month, the newly unemployed aren't eligible to get the subsidy at all. The proposal to extend subsidies to those who get laid off through the end of the year is languishing in Congress, a casualty of worries about the federal budget deficit in an election year.

Congress has extended the subsidies four times since February 2009, but the latest effort stalled before the Memorial Day recess. Congress may consider extending them again when members return next week, but it's unclear how long such a proposal would take to make its way through and what support there'd be for it.

So the unemployed may pay more to remain on COBRA without subsidies, look for insurance on the individual market, go on Medicaid if they qualify or lose coverage altogether. That could further tax a health care system that's already struggling to keep up with the number of uninsured.

Some who have expiring COBRA coverage or didn't get the benefit could be eligible to join existing state high-risk pools or soon-to-be-launched federal high-risk pools, but the federal pools require participants to have pre-existing conditions and to have been uninsured for six months.

Karyn Schwartz, a senior policy analyst with the Kaiser Family Foundation, said some people who continued their COBRA coverage might have another option: a state "HIPAA-eligible" plan. (Kaiser Health News is a program of the Kaiser Family Foundation.)

Each state offers one for people with pre-existing conditions whose coverage on COBRA has expired, but the premiums are often very expensive, and people must meet exacting criteria to qualify: They must have had COBRA for 18 months, have been covered the entire time, have pre-existing conditions that would preclude them from getting other coverage and be able to pay the higher premiums such plans would charge. Many people may not be able to meet such a high threshold.

Additionally, 40 states offer so-called mini-COBRA laws to supplement federal COBRA, which can provide additional benefits for as long as 36 months. The cost, however, is often higher than other coverage, such as an individual policy.

The bulk of people who are losing insurance may simply decide to drop their coverage altogether, joining the ranks of the uninsured, Schwartz said.

"It can be hard to keep their health insurance. Often the quality of what people can get on the individual market may not be as great," she said, adding that individual plans are often more expensive and don't cover things their employers' plans did. Additionally, people may decide to pay other bills, such as rent, instead of health insurance. "They may decide it's better," Schwartz said.

However, Carrie McLean, a consumer specialist with ehealthinsurance.com, an insurance aggregator, said that people should price the plans on the individual market to see whether one was affordable for them. Consumers also should see whether they're eligible for premium help under their states' Health Insurance Premium Payment programs, which cover people under the Medicaid program if such coverage is deemed "cost-effective," or whether mixing and matching coverage for different family members could help them save money.

For example, children may be eligible for coverage under the Children's Health Insurance Program while other family members have individual plans. "Going with no insurance at all, you're putting yourself at so much risk," McLean said.

Katie Kemple, who was laid off last year from her job as a public relations professional, said she'd buy individual coverage for her family after her COBRA subsidy ends in August. Right now, she's paying $450 a month for coverage for herself, her husband and her 2-year-old with the subsidy, which is similar to what she says she'll pay for a high-deductible plan on the individual market. However, the coverage won't be as good as the COBRA subsidized plan she has now and the deductible is $5,000, she said. "That's before anything kicks in."

Nonetheless, for Kemple the choice is easy: "I would have gotten rid of anything else other than health insurance," she said. "Other things come and go."

(Kaiser Health News is an editorially independent news service and a program of the Kaiser Family Foundation, a nonpartisan health care policy organization that isn't affiliated with Kaiser Permanente.)

ON THE WEB

Treasury Department study of COBRA

Kaiser Commission policy brief on Medicaid and the uninsured

State COBRA law directory

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