Monday, January 12, 2009

News You Can Use: Govt. may subsidize COBRA

Someone who knows someone who knows a lobbyist close to the stimulus package talks tells Workforce Management that Congress may be considering a 50% to 60% subsidy of COBRA premiums for employees who lose their jobs. The subsidy would last 18 months, the maximum time workers can maintain COBRA through their ex-employers.

One of the biggest complaints about COBRA has long been that it's too expensive -- particularly for workers who suddenly find themselves out of work and/or need to cover their entire families. However, health industry experts also lament that Americans have been sheltered from the true cost of health care and coverage, which is why COBRA induces such sticker shock.

What say you? Should the government subsidize COBRA premiums? For how long? President-elect Obama seems to lean in favor, WM reports. Do you? Comment below.

59 comments:

Anonymous said...

A 50-60% subsidy would be great. I'd pay less than I do as an active employee. I don't think that's really what they want.

Anonymous said...

It is not the govt's. responsibility to insure we have the same type of coverage after employment is ended. There are other less expensive options available than the richer plans our employers provide for us.

Anonymous said...

I guess this is better than the auto industry, but Americans NEED the sticker shock of how out of control our healthcare costs are.

Mark Gow said...

On the surface this seems like something that might (finally)provide relief where it is most needed. Instead of saving companies to, in theory, save jobs, this would provide real assistance to those in the most dire of circumstances. The only caution would be how to avoid an entitlement mentality and how to (eventually) end the program.

Anonymous said...

No. Life is sometimes expensive. They can get an individual plan or a temporary plan. If you're going to subsidize anyone, subsidize only those that are denied an individual plan due to medical reasons.

Once again government trying to solve every problem with an all or nothing effort.

Anonymous said...

If we had universal health care provisions, this wouldn't be necessary. If you lost your employer coverage, then you would be picked up as an option with basic health care coverage under a universal plan. Obama should continue to consentrate on a system of coverage for all "legal" Americans. Most states also have provisions to cover children under a paid for state plan that a person could use to enroll dependants etc.

Marit Brock said...

This is a tough issue. On one hand, employees who have lost a job and don't have another one lined up are the least able to afford the huge cost of insurance premiums, particularly family COBRA coverage.
On the other hand, this seems like a band aid that will do little to help keep the cost of our healthcare system down. I can just imagine the back room talk -
"Well, since the government is going to pick up half the tab maybe we can ratchet those premiums up a little higher..."

Wherever that back room is, someone is surely going to get an idea like that.
So the question is, do you help people who really need it now, or try to let the pressure mount on the system until we have no choice but to make some lasting changes. It may make more sense to expand eligibility for the federal employees health insurance program or temporarily expand coverage through Medicade to those out of work. Lets hope that this recession doesn't last long enough for any of these cost increases to become permanent.

Anonymous said...

Subsidizing COBRA is an option. However, individuals that have insurance are also in great need of a subsidy. My COBRA ended 3 years ago and the cost was cheap compared to what I pay now. Even with no health issues, my premium payments for single coverage are $600+/month.

Anonymous said...

No...We do not need additional Federal Government programs. This needs to be handled on the state level.

Anonymous said...

Sounds good too me. But, maybe should be based on how much of the premium they paid when they worked.
Gov't pays portion that company used to pay.

Anonymous said...

COBRA is often double the cost of individual coverage. First, should require people to look at individual coverage. If cannot get coverage there, then must remain on COBRA, so maybe then a subsidy.

I vote that they rid of income tax on unemployment benefits. What a concept that would be!

Anonymous said...

Of course when you lose your job, whether suddenly or not, money is a big issue. Just ask anyone who has a family, small children, braces, tuition, mortgage and car payments, etc. Everyone needs medical coverage since one catastrophic claim can wipe a person out, but how can anyone afford COBRA? Taxes are drained from paychecks, income tax returns drain even more. By the time most younger folks get to retirement age, all the money they've contributed towards social security will be gone. Why not give something back to the people who really need it. And stop focusing on helping only the rich. It's us lower paid folks who need the help. How's about it?

SmBizFamilySense said...

Instead of new entitlements & admin costs: EXPAND MEDICARE, MEDICAID, & FEDERAL HEALTH PLANS !!

D.Meadows said...

What I would like to see is addressing the REAL issue, the cost of health care. Instead, we put another taxpayer band-aid on it.

Bob Smyth said...

It's a nice thought, but another step on the slippery slope to socialism. Can the government afford this new entitlement? How much will it cost annually? What about the deficit? The national debt? Why 50%? Why not 75% or 100%? Why just COBRA? Why not all medical premiums?

David Bartash - Vitech Systems Group said...

The State of New York runs a subsidy program for entertainment industry workers that enroll in COBRA.

From my experience dealing with the State of New York's program, I see the following areas that will possibly create heartache for employers and union funds...

1) Who gets the government money? Does the employer have to bill the government (after the participant enrolls in coverage) or does the participant apply for reimbursement after he/she has paid an invoice?

2) If the employer bills the government, are they required to provide coverage to the participant as soon as the participant pays his/her share of the bill? How long will the employer have to wait until the government pays their subsidized portion?

3)How much will it cost an employer that is outsourcing the administration of their COBRA benefits to have their vendor change the process to allow for the Government subsidy? Is the government going to offer a tax-break for that?

4)What about reimbursement to the Federal Government for money initially paid to subsidize a COBRA plan for an individual that was later rescinded? Muli-employer unions might have fun dealing with this problem if they grant health eligibility based on reported earnings. There may be cases when an employer report a participant's earnings late or incorrectly, forcing the participant to go on COBRA in order to avoid a break in coverage. After the earnings issue is resolved, the Union may retroactively replace the participant's COBRA coverage with normal health eligibility.

Anonymous said...

"Government" translates to tax payer, and the taxpayer burden is already too great and growing worse - there has to be a better way than government-subsidized COBRA for individuals who find themselves without coverage.

Access to "pooled" coverage where categories of groups or individuals come together to form an entity - thereby reducing their cost of coverage might be one option.

Anonymous said...

Being a Group Insurance Broker for the past 20+ years I have had to deal with bringing the costly and shocking news of what health care plans actually cost to COBRA employees.

I think it would be a terrific idea to help terminated or laid-off employees with their COBRA premiums...it would most likely increase the take-up rate from the -10% dismal take-up rate we see currently.

Patrick Cifor, Co-Owner
Benefits Access Ins.
Walnut Creek, CA

HRweenie said...

It's about time that somebody recognized that a person laid off cannot afford the health care premiums.

Anonymous said...

No. We are headed toward socialized medicine inch by inch and no one is watching.

Anonymous said...

Why not? we're subsidizing everything else except our own paychecks, which are likely to get smaller...

Tiffany said...

I have no idea what the long-term ramifications would be, but how much is the US spending/losing on the uninsured and lost productivity? Could the subsidy be limited to a certain time-frame and reviewed for changes/discontinuation at the expiration?

I'd like to see legislation prohibiting noncoverage of pre-existing conditions and increased premiums due to same so people who are un- or self-employed, and those who don't have employer-provided coverage, can better afford basic coverage on their own if necessary. Such legislation should be written by law-makers - NOT the insurance industry/lobbyists as was allowed by the Bush administration for Medicare Part D, which only added to the insanity of our current "system." We didn't elect or authorize the insurance industry to act in our best interests - or its own.

Herb said...

Excellent idea. The subsidy should be for a period equal to the period availabe under COBRA or until the participant obtains new employment, whichever comes first.

Julie in Philadelphia said...

Yes, I think the government should help subsidize COBRA because there are many people who can't afford it and must drop health coverage. However, I think it should be a temporary fix on our way to national healthcare. Ideally individuals should be able to sign up for quality health care that they can afford through a national plan and then there would be no need for COBRA. COBRA is a bandaid on a broken system.

Anonymous said...

Who will pay the 50 to 60%? The employer, me and you, our children?
This is one more small step toward national healthcare.

Anonymous said...

I think it might be easier to just have a credit or deduction on the individual's tax return for COBRA premiums if the cost exceeds $XXX (maybe the individual could file quarterly for a refund). What if the individual worked for a small employer with a plan that does not offer COBRA? Does this mean only individuals that work for large companies can have help with insurance costs if they loose their job?

wearyinhr said...

Absolutely not. I have empathy for persons that are not employed and must pay COBRA to continue their healthcare benefits but where is it going to stop. If the government keeps subsidizing everything what real incentive is there for someone to actively look for employment. The goverment is handing them their unemployment checks for at least 30 weeks and now 50% of their healthcare cost will also be paid. Which of course Mr. and Mrs. taxpayer is footing the bill.

Anonymous said...

Nice idea but don't we all have some responsibility to plan for a rainy day? Do we really want or need the government to subsidize everything. After all it is our money.

Anonymous said...

Why should the government help people without jobs? What about the people who have jobs and can't afford insurance? Those are the people we should be helping!!

Anonymous said...

You can't be serious...it's not the cost of COBRA it's the cost of care.If I work hard, pay my bills, try to save for an emergency and you overspend, live high on the hog above your means, why should I subsidize you. Maybe we should all just turn over everything to the government, direct deposit our pay to Washington , if we are lucky enough to still be working,and then put in a request for what we need.

Cathi Webb said...

The government should help the working man!!

Anonymous said...

It sure sounds nice to say. But the cost would be staggering. And what of the employees who work somewhere with no COBRA obligation. What will Uncle S do for them? Typical politics...1,000 men hacking at the branches of the problem and none at the roots.

Anonymous said...

I think it might be a good option for people who are using COBRA to bridge coverage while they wait to become medicare eligible. However, it seems like it could cause employers to increase COBRA premiums resulting in the the Gov't subsidizng employers. Too much opportunity for misuse.

Anonymous said...

Absolutely!

Cobra prices are exhorbitant!!!

Rayanne said...

I think it sounds like an interesting idea, I don't know if I am in favor or not. It would certainly help individuals and families who have lost their income. I have to agree that many workers have been sheltered from the true costs of health care. I have spoken with many people who tell me they were completely unaware that the cost of COBRA was the amount of their health insurance premium when they were employed. There's no easy answer but this may be a short term "stop-gap" measure.

Anonymous said...

We know COBRA is at best a very short term solution for those who lose their jobs and need health insurance. In today's economy and high unemployment, COBRA's cost make it a very ineffective solution. I would urge the Congress and the President to find a speedy solution and subsidizing COBRA's cost is a very good solution.

Anonymous said...

I offer support only if they subsidize, in the same proportions, the premiums for all payors.

Anonymous said...

It sounds like it would be another bit of help to folks who have lost their jobs.

However, if the firm the terminated employee left, went out of business. THEN there would be no COBRA because the Group Health Ins. would be canceled. What now?

AF

HR Professor said...

I have mixed feelings. Having no health insurance coverage is risky enough when employed; it could be catostrophic when coupled with unemployment. Considering the current economic state, I can see the benefit of not letting citizens slip deeper into the financial abyss trying to pay for medical conditions without any insurance coverage. That being said, I am exteremly concerned at how this will be implemented. What additional burdens will be levied on employers? US employers are already swimming in regulations that are non-existent in the countries we are competing with and losing jobs to!

K. Ray said...

If the government subsidizes COBRA, the subsidy should not exceed 25% of the total cost. We have to come to realize the cost of the benefits we receive, and this in one way to do that.

Anonymous said...

It might not be a bad idea but about the dependant children who will not longer be covered on their parents insurance.
It would be nice if the employer would cover dependant children until age 26.

Anonymous said...

Yes. When you compare the cost of other health care options under consideration as well as the cost to all of us for care for the un or under insured (which is passed on in the form of higher health care costs), the COBRA subsidy idea is worth investigating.

Anonymous said...

Be prepared! This will be the first step towards gov't sponsored universal health coverage.

Anonymous said...

Not only should the government subsidize COBRA, but the law should also be changed to extend the length of time COBRA is available to those whose jobs are eliminated after age 55. It is very difficult to find another job in this economy and at older ages and almost impossible to afford individual coverage after COBRA expires for those over 55.

Anonymous said...

I find it interesting that insurance is too expensive for individuals to pay, while the push from the other direction has been to have employer required (paid) insurance mandates.

There doesn't seem to be any recognition by those who receive employer paid insurance or our politicians that the (exact same) cost of healthcare is equally painful for employers to provide. Subsidizing COBRA only insulates the public from recognizing that our healthcare system (with $5 prescriptions and "free" care) is failing. There needs to be more emphasis on all parties to understand the costs/benefits related to healthcare so a balance can be achieved where needs are met and costs are contained.

Anonymous said...

Yes, I would rather we help the laid off worker where it counts than give the money to the banks!!!
Though I think 18 mos is bit long and would agree to 12 mo.

Anonymous said...

And where would that money come from? More taxes -- either on consumers or employers?

Anonymous said...

While we strongly simpathize with the plight of the unemployed, subsidizing COBRA would be a mistake. The effect could significantly drive up claims costs to the employer's plan. Former employees with health problems would find it much easier to stay on COBRA, incurring claims for 18-36 months that affect renewals and claims costs for the former emplyer. Is this what we want to do to employers who are already faced with spiraling health care costs? No easy answer here...

Anonymous said...

I agree that COBRA payments create "sticker shock" for most applicants. In addition, only those usable to qualify for another type of coverage take the COBRA benefit. My question is IF the benefit is subsidized where will the money come from? These are so many "needs" but we cannot fund them all. Better to ease restrictions on State pools for those unable to afford COBRA.

loisr said...

Where is the government going to get the money????

EBN Editor Kelley M. Butler said...

Wow, quite a debate we have going here! Thanks to all for your valid and thoughtful responses. We'll be featuring some of them in an upcoming issue of the magazine. Also, we're planning an upcoming feature on the proposals, and will follow the issue as it travels around Capitol Hill. Thanks for reading, and keep the discussion going! --Kelley

Leah Shepherd-- managing editor of EBN said...

An individual might be thinking they can't afford to pay the montly COBRA payment, but they should think twice if they have a chronic health condition. If they go without insurance for too long, that condition might be excluded the next time they get coverage. The future cost burden could turn out to be much worse than the COBRA payments.

516 said...

For a typical family in my neck of the woods COBRA insurance would cost approximately $1,000 per month. The income for the same family would be a bit over $2000 per month if only 1 parent received unemployment benefits. With rents averaging $1000 per mo. there's no way that this typical family is going to pay for COBRA coverage, if they did the prescriptions they would get from a doctor's visit would be for food for malnutrition. Even if the gov. were to subsidize COBRA most families still could not afford the 50 to 60% premium. There may be unforseeable problems with subsidizing COBRA, how will it affect rates for employers who are being slaughtered by the enormous premiums they already pay? What about the portions of that premium that the employee pays that is taken out of his or her paycheck? Premiums for the plan I belong to have increased by almost 200% over the past 10 years and will increase again this year, why? It seems the only way US companies can compete,particularly in the dying manufacturing sector is to eliminate health insurance altogether, or, move to Mexico,China,etc.and not deal with it, is this subsidy going to help save my job?

Anonymous said...

I think the employer should be made to subsidize the coverage.

Anonymous said...

Healthcare issues always create a stimulating conversation, sometimes quite intense. What strikes me is how each viewpoint appears to not be able to understand where another viewpoint is coming from.

We have all played a part in creating the current healthcare culture. The lack of transparency in the transactions from the insurance, hospital, and employers (not making the complete cost apparent to employees), as well as medical providers being unaware of the real costs while creating a victim patient vs. an empowered patient. We also all have a personal responsibility for our health and to be informed which is difficult in the way of prices. Where is the payment for promoting and delivering prevention?
.
Changing 35 plus years of this culture in just 2 to 3 years is very difficult.
Cobra was a good idea but it has many problems and fails to do what it was intended due to expense and paperwork confusion.

Keep in mind, whether we like it or not, we ALL pay for this healthcare problem sooner or later. If we can not find ways to come together on this issue, it will become a national disaster following on the heels of this current financial crisis since medical bills are reported unpaid and hospitals are using collection agencies much sooner than in the past. Perhaps your FICO score will be taken into consideration for insurance coverage.

I do not think that people realize how difficult it can be to get individual coverage, let alone afford it w/ the median income in this country being around $40,000, which then changes when a job is lost.

Some better approaches may be to:
Allow those who lose healthcare to buy into existing systems, with affordable premiums, Government, Medicare, Medicaid, since people may very well end up there later so when not have something paid and perhaps keep their long term cost from increasing. This could also address those with a pre existing conditions.

If you stop and think about it, business says the healthcare costs are a main cost decreasing their ability complete in global markets. So what if we all had the ability to chose from a menu of NATIONAL health plans that were CLEARLY outlined on a NATIONAL website with prices, medical coding, clear coverage details. Then these could all be offered thru employers and also bought by individuals. How about a national 401K to encourage savings. Isn’t strange that you can save $15,000 tax deferred in a 401K and only $4500 in an individual IRA?

For the free marketers out there, the Insurance and Finance companies can compete for administration of such plans, website management, etc, much the same as they do now for large companies.

Just think, then small business could attract top talent, which, due to a lack of attractive benefits, it may not be able to do. Workers could then move to another employer without all the current hassles.

So, who loses with a national platform? And don't say choice, since many people do not have choice now and have long waits now as well! Follow the interests groups and the money...

Last note, take a good look at your health profile, would you be able to get insurance coverage? and at what cost? and then how about your family members?
Be sure to read the fine print to see what is really covered if you do happen to get it.

So, we need to put ideology aside and deal more pragmatically with this whole issue. This impacts those at all levels of income in some way and finding a lasting solution is in everyone's best interests.

Personal Note: I am healthy and feel very lucky, my husband is diabetic w/o meds of any kind, and active. He has still been turned down for individual coverage. We have insurance coverage thru employment but the quality has decreased each year w/ a continued increase in cost. So, here we are, covered for now, how about you???

Anonymous said...

If government is going to get involved, I would like to know where the money will come from to subsidize, AND see more emphasis placed on how to help employers avoid lay-offs in the first place.

Anonymous said...

There are many selfish bloggers on this topic. I have a friend who is currently uninsured because he can't afford COBRA and can't take out a private policy and actually use it because of pre-exisiting condition clauses that would follow him into his next job's group insurance. The government created COBRA, which is helpful for those that can afford it. I agree that healthcare insurance is too expensive, which is a separate issue that needs addressing. Don't punish the unemployed further in these rough times. Have some compassion and learn to share.

Anonymous said...

WAKE UP PEOPLE!
who do you think the "government" is? It's US! quit calling on the government to cure all of our ills. unless you 'want' a personal income tax rate of 53% like that of the Canadians. enough is enough...people who take COBRA have medical conditions, should other Americans pay their premiums for them? with this and welfare, why try to find a job once they've lost theirs?

RealAmerican said...

COMPANIES ARE ALREADY SWITCHING TO LESS COSTLIER (FOR THEM) HEALTH INSURANCE PLANS THAT UP THE PREMIUMS FOR THE WORKERS, BUT BECAUSE OF THE GOVT SUBSIDY, THE WORKERS PAY THE EXACT SAME, WITH THE GOVT PAYING THE PREMIUM DIFF. THE COMPANIES ARE THE ONLY ONES BENEFITING BECAUSE THEY ARE THE ONLY ONES PAYING LESS TO THE HEALTH INSURANCE COMPANIES WHILE THE TAXPAYERS ARE FOOTING THE SUBSIDIES. !@#$#@!$ AMERICAN CORPORATE GREED.