The end of federal government assistance in paying health insurance premiums has necessitated finding other possible options by some out of work. The government’s subsidy had helped the unemployed to continue receiving coverage under their former employer’s health plan.
The Consolidated Omnibus Budget Reconciliation Act of 1985, known as COBRA, enables previous employees to remain under their former employer’s health insurance for up to 18 months as long as they pay for their own coverage. In 2009, under the American Recovery and Reinvestment Act, the federal government began offering a 15-month COBRA subsidy that lowered premium costs for the unemployed by 65 percent.
Congress decided in 2010 not to extend COBRA assistance
To be able to receive the subsidy, recipients must already have been eligible for COBRA due to the involuntary end of their employment between September 2008 and May 2010. Those who began receiving the subsidy in May 2010 lost their eligibility for premium assistance after August 2011. Congress had previously extended the subsidy but declined in 2010 to continue the effective period beyond August 2011 citing concerns over the growing federal government deficit.
The immediate outcome for the unemployed with COBRA coverage is to pay for their health insurance in full, find a coverage policy of limited duration, or lose their insurance altogether.
However, following the August 31, 2011 ending date, the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) clarified that under some circumstances eligibility remains for the subsidy beyond that time. Employees who were involuntarily terminated by May 31, 2010 may continue to pay reduced COBRA premiums if their COBRA coverage did not start until a later date under their employment severance, and if they are not eligible for a separate group health plan or Medicare.
According to EBSA, if workers lost their jobs before May 31, 2010 and were permitted by their employers to continue their work-sponsored health coverage, their COBRA subsidy eligibility would start with the end of the company-paid insurance.
Any eligible workers (or their family members) who contend they were wrongly denied the subsidy assistance by their former employer can submit a review request to the Labor Department or the Department of Health and Human Services, which will then issue a ruling on the case.
Prospect of individuals paying health premiums in full
With the end of the 15 months of receiving subsidy assistance, some individuals who aren’t able to enroll in a new employer health plan may decide to pay their premiums at the full rate for the remaining three months of their COBRA eligibility.
“When it initially passed, analysts predicted the $25 billion COBRA subsidy would help more than seven million laid-off workers and their families across the country. In fact, a Kaiser Family Foundation study found that those retaining health insurance through the program doubled after the subsidies became available, indicating that many Americans will likely be unable to afford coverage after the Sept. 1 deadline,” the International Business Times reported August 25, 2011 in “COBRA’s Federal Subsidy to End Sept. 1.”
Average monthly COBRA premiums for many families are more than $1,000, and the main provider being out of work forced them to rely on the subsidies. But other families still couldn’t afford health insurance or get replacement insurance.
“The U.S. Bureau of Labor Statistics calculated that more than 45 million people were laid off or discharged from a job from 2008 to 2010. About 15 million lost all access to job-based health insurance. And of that number, 9 million couldn't afford or couldn't get new coverage either through COBRA or by buying individual policies,” Diane Stafford said in “More than 50 million Americans now without health insurance,” in the Seattle Times August 24, 2011.
Options with existing or new health coverage
Before the existing COBRA coverage ends, it is possible to inquire about alternatives with the current insurer though those options could be more expensive. For those with a pre-existing medical condition and who are covered by COBRA, it is advisable not to let the current insurance end without being approved for another plan. Someone in relatively good health might be able to find insurance for a lower rate than COBRA coverage.
Those now without the subsidies may have to turn to the individual insurance market (including for small businesses) or government-sponsored programs. The states have jurisdiction for most areas of health insurance, though the new federal health care law extends it to those considered to be in high-risk categories and to children's insurance.
It is possible to qualify for assistance based on income or meeting other specific criteria such as having other prior insurance like COBRA without an interruption in coverage exceeding a certain number of days. Being uninsured for a longer time can end the availability of discounted rates that some medical providers accept from insurance companies. Some doctors and hospitals will allow patients a discount for paying up front or for establishing a payment plan.
Small business owners may qualify for group health insurance or related tax reductions based on their state’s rules. Though not all may be eligible, the 2010 health care law provided a tax credit of up to 35 percent of what some businesses will spend on health insurance premiums for low- to moderate-income workers.
Sources:
- U.S. Department of Labor
- Sarah Kliff, “Did the COBRA health insurance subsidies work?” Washington Post, August 31, 2011
- “DOL Clarifies That Some May Qualify for COBRA Subsidies,” Daily Report for Executives, September 2, 2011
- “COBRA’s Federal Subsidy to End Sept. 1,” International Business Times, August 25, 2011
- Diane Stafford, “More than 50 million Americans now without health insurance,” Seattle Times, August 24, 2011
- Eve Tahmincioglu, “Experts offer advice for those seeking health coverage,” msnbc.com, August 28, 2011
John Seidenberg - John Seidenberg has worked on newspapers, newsletters, radio news, and produced specialized news publications as well as freelance ...
