BY MICHELLE SINGLETARY | THE MIAMI HERALD
msingletary@MiamiHerald.com
Santa couldn’t have done better.
Millions of Americans got a great gift when Congress passed and President Obama signed a bill that included a provision to extend a subsidy helping those out of work continue their health insurance coverage.
Last February, Congress established the subsidy under the Consolidated Omnibus Budget Reconciliation Act, commonly referred to as COBRA.
Under COBRA, former employees receive health coverage at their employer group rates. But they have to pay the full premium, including the share that the employer used to pay plus a 2 percent administrative fee. But many who become unemployed cannot afford the premium, which can consume 83 percent of their unemployment income, according to a report by Families USA.
Laid-off workers first became eligible for the subsidy in March. Those who take advantage of the program pay 35 percent of the COBRA premium, and employers pick up the remaining 65 percent, which is then reimbursed by the government through a payroll tax credit.
Because the subsidy was only to last nine months, the first eligible group was cut off at the end of November. Others who were facing losing the subsidy at the end of the year became stressed at the prospect of unaffordable monthly payments.
“How can we, as unemployed American citizens, pay those ridiculous premiums?” asked Jeff Krebs of Reynoldsburg, Ohio, in an e-mail to me. Jeff lost his job 16 months ago and his wife lost hers in April. Thanks to the COBRA subsidy, their premium was $450 a month. Without an extension, the Krebs were facing a jump to $1,550.
“This is like winning the lottery for us, especially right before Christmas,” Krebs said. “You do not understand what a relief that has just been lifted off our shoulders.”
I do understand. I hear often from so many laid-off workers struggling financially to keep health coverage. The COBRA subsidy program extension included in the 2010 Department of Defense Appropriations Act will do the following:
• Expand the amount of time people can qualify from nine months to 15 months.
• Extend the eligibility period for the COBRA premium reduction an additional two months. Before the extension, you had to have been involuntarily separated from your job between Sept. 1, 2008, and Dec. 31, 2009, in order to qualify. That period of eligibility has been stretched to Feb. 28.
• Give credit to people who paid the full premium in December. Individuals should contact their plan administrator or employer sponsoring the plan to discuss a credit against future payments, said Phyllis C. Borzi, assistant secretary of labor. The legislation assures that people who were receiving assistance but whose eligibility has expired will be reimbursed, and they will have the option for re-enrollment, said Sen. Sherrod Brown, D-Ohio, one of the legislators who pushed for the subsidy extension. This particular provision is a welcome relief for Ricky Crawford of Huntsville, Ala. He and his wife had to make a full premium payment of $1,013 in December. With the subsidy they were paying $350. “My wife has some health issues, which, without insurance, we would certainly struggle financially,” Crawford told me.
• Require employers to send out notices to laid-off workers outlining the most recent changes in the COBRA subsidy. For example, individuals who had lost the subsidy will now have additional time to pay the reduced premium to keep their coverage.
After the subsidy was first passed, COBRA enrollment doubled, according to an analysis by Hewitt Associates. With the subsidy, the cost of maintaining the average policy is $398 per month for a family and $144 for an individual, according to the Kaiser Family Foundation. Without the subsidy, that cost jumps to $1,137 per month for family coverage and $410 per month for individual coverage.
Unfortunately, if your company closed or went bankrupt and there no longer is a group health plan, the COBRA subsidy is not available.
Hear Michelle Singletary’s personal finance reports on www.npr.org. Readers may write to her c/o The Washington Post, 1150 15th St., NW, Washington DC 20081.
Loss of health subsidy looms
A new study estimates that the end of a hefty government subsidy could force millions of laid-off workers to pay more than 80 percent of their monthly unemployment checks to keep their job-based family health insurance coverage intact.
An estimated 7 million jobless workers and their dependents are thought to have received the temporary subsidy, which pays 65 percent of their health insurance premiums under a law known as COBRA (the Consolidated Omnibus Budget Reconciliation Act).
However, the nine-month subsidy expired Monday for those who first began receiving it in March through the American Recovery and Reinvestment Act.
U.S. program takes sting out of COBRA
This is one of a series of reports that look at selected economic stimulus programs.
When Stuart Kaplan was laid off on New Year’s Day, his wife was still recovering from breast cancer. So he knew he would want to opt for COBRA, a federal program that requires companies to continue offering health insurance to laid-off workers even after they leave their jobs.
The catch: The law allows companies to charge workers for the full premium instead of the fraction that they typically charge current employees, with the company picking up the rest.
COBRA’s a conundrum for many who lose jobs
The federal stimulus package will pay 65 percent of the cost of COBRA health insurance for those being laid off, but it’s unclear how big a difference that will make to people in South Florida who’ve lost their jobs.
Consider Laurita Robinson, a Pembroke Park accounts payable manager who was recently laid off when her company moved its billing operations to New York. She had a family policy, covering her husband and daughter. Under COBRA, such policies usually run $1,000 or more a month.
Even with the government picking up 65 percent of that, “that still leaves me about $350 or so, and that’s pretty expensive when you consider unemployment [insurance] isn’t that much, ” Robinson said.
Laid-off workers struggling to keep COBRA benefits
Stan Rosen of Miramar lost his job, his wife was six months pregnant and he faced an operation — but he felt he could manage because he had COBRA health insurance.
Then, he mistakenly underpaid his November bill by two cents, and his benefits administrator said his policy was being canceled. Rosen and his wife, Sabrina, saw their life crumbling. He quickly paid the two cents, but it was only after he and his dad called about 100 times and The Miami Herald inquired that the company relented and continued coverage.
The Rosens’ case is an extreme example of something that’s happening frequently throughout South Florida: Laid-off workers are struggling through a difficult maze to keep health insurance while insurers and former employers have no interest in helping them beyond what federal and state laws require.
COBRA: What you need to know
One of the biggest shocks people get when they’re laid off comes with the COBRA package — the offer for health insurance for the next 18 months. What’s stunning is the cost — often $400 or more a month for an individual in South Florida, $1,200 and up for a family.
As part of the Obama stimulus package, the federal government is now picking up part of COBRA costs. Even so, many of the newly unemployed still find it a daunting expense. There are alternatives to COBRA, but just like discussions on healthcare reform, deciding what to do about health insurance is exceptionally complex.
What follows is a primer about COBRA and health insurance in the recession, based on the advice of a half-dozen experts.
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