Goodbye COBRA: Today’s the Day That Federal Subsidies Run Out

You knew this day was coming: It’s the day that federal COBRA subsidies for unemployed workers runs out.

As a blog post at The New Republic put it:

Some Americans who lost their jobs in the recession are about to lose something else: Their access to affordable health insurance. And it’s thanks to the same backwards thinking that’s preventing broader action to boost the economy.

Ever since February 2009, the federal government has been subsidizing COBRA premiums. COBRA is the program that allows people to keep their job-based insurance even when they lose their jobs. The premiums tend to be very expensive, particularly for people out of work, so the subsidies make a big difference.”

A 65% federal subsidy

Yes, those COBRA subsidies have made a difference, because if you have ever been in a situation where you were out of a job and wanted to continue your health insurance under COBRA (full disclosure: I have) you know that it is pretty pricey do do so.

Kaiser Health News follows this kind of stuff closely, and reporter Phil Galewitz points out that Congress voted to extend the federal COBRA subsidies several times to help cushion the huge number of workers who are unemployed:

In February 2009, at the height of the economic downturn, Congress first approved a 65 percent subsidy for COBRA premiums to help those who had been laid off starting in September 2008.

Congress extended the COBRA subsidy three times to cover workers who lost their jobs through May 2010, but lawmakers last year resisted another extension amid rising concerns about the federal deficit. The subsidy lasted for up to 15 months so it expires Wednesday. (There is one exception, a Labor Department spokesman said. If workers laid off before May 31, 2010 were allowed by their employers to continue to receive their work-sponsored health coverage, their subsidy eligibility would begin when the company-paid insurance ended and could extend beyond Wednesday.) “

How many were helped by the subsidies?

The subsidies have undoubtedly helped the unemployed keep their health insurance going at a reasonable price — back when I opted to utilize COBRA several years ago, the most basic coverage that I could only use in the event of a catastrophic medical emergency was nearly $1,000 per month for family coverage — but the billions of dollars it cost to do so have run out amidst the recent budget battles in Washington. As Kaiser Health News notes:

Studies vary on just how many people were helped. Hewitt, an employee benefits consulting firm, reported in 2009 that COBRA enrollments had doubled, from 19 percent of eligible individuals to nearly 40 percent. In contrast, Ceridian, which administers the COBRA benefit for many employers, found that COBRA enrollment increased from 12.4 percent to 17.7 percent.

The Treasury Department last year reported that up to a third of eligible unemployed workers took advantage of the subsidy — helping as many as 2 million households at a cost of $2 billion in 2009. But the nonpartisan Employee Benefit Research Institute questioned that figure, suggesting it was likely inflated because employers may have counted the same worker twice.

What is not disputed is that the COBRA subsidy made a big difference in the price of coverage. The average price for family coverage is about $1,137 a month, according to the Kaiser Family Foundation. With the subsidy, COBRA coverage costs an average of $398.”

Continuing would have increased the deficit

Everyone knew the COBRA subsidies were one of those things that are too good to be true. And everyone knew the day would come when Congress would let the subsidies expire. Well, that day is finally here, like it or not.

The New Republic thinks this is a bad thing, and it certainly is if you were among the millions counting on the federal subsidy to help make your health care coverage under COBRA more affordable. But did anyone believe it would continue forever? As TNR says:

Offering COBRA subsidies, like extending unemployment insurance, is the kind of anti-recessionary action lawmakers once undertook without hesitation. And when the initial subsidy program was set to expire, Congress renewed it through the middle of 2010. But while yet another renewal had support from both President Obama and key Democratic leaders, including then-Speaker Pelosi, Republicans and some conservative Democrats opposed it because it would increase the deficit.

And that’s true: It would have increased the deficit by several billion dollars, depending on the length of the extension, although centrists and conservatives showed no enthusiasm for proposals that would have offset the cost with other spending cuts or tax increases. But even if extending COBRA would have increased the deficit, it would have been money well spent — providing a (very very) mild boost to the economy while making it easier for people to get health care. As a recent Commonwealth Fund study demonstrated, people who lost insurance during the downturn have been much more likely to postpone or skip recommended medical treatments.

Of course, this is becoming an old story. Millions of Americans are struggling. And Congress, in the name of austerity, is doing its very best not to help them.”