With the nation's unemployment rate rising to 9.8 percent in September, many laid-off workers continue to struggle to pay their health insurance premiums despite a federal subsidy.
With the nation's unemployment rate rising to 9.8 percent in September, many laid-off workers continue to struggle to pay their health insurance premiums despite a federal subsidy. Paul Sakuma/AP
If you have ever lost a job and the health benefits that went with it, you have probably heard of COBRA, the program that requires employers to extend your health coverage for a price.
That price, however, is one that all but a fraction of laid-off workers find much too high. The federal stimulus bill has helped some workers by lowering those payments, but that help may soon run out.
Nicole Pelton, who lost her job in March as a marketing manager in Silicon Valley, says she doesn't want to worry about taking her kids to the emergency room and having no way to pay for it. After the shock of being unemployed eased, she says she worried most about keeping her young family insured.
Help From Subsidy
That's where COBRA comes in — or at least it's supposed to.
"That was going to be about little over $1,000 a month. That was probably more than half the unemployment benefits," Pelton says.
Like countless unemployed people before her, Pelton found that the COBRA coverage was out of her reach — she would have to pay the entire premium.
Then, she found out the federal government would cover two-thirds of the cost for nine months, through a new program approved by Congress in February as part of the stimulus bill. She signed up, and now she pays about $350 a month to cover her family. It is still a big expense, but Pelton and her husband have managed to pay the bill.
"The subsidy came at a good time because it was very expensive, the monthly amount we paid," she says.
The subsidy appears to be having the effect Congress and the Obama administration wanted. No one really knows yet how many people have actually signed up for COBRA. One survey of large companies found that the percentage of eligible laid-off workers who continued their employer health insurance doubled from 19 percent to 38 percent after the subsidy kicked in.
But if the government is picking up most of the bill, why isn't the program even more popular?
Marian Mulkey, a COBRA researcher at the California Health Care Foundation, says the newly unemployed are being asked to pay 35 percent of the cost even though they don't have jobs.
"That's still a large cost you're being asked to maintain month after month, when you're doubtless facing many other economic challenges and balancing your household budget," Mulkey says.
That's not possible for many families. Even with the federal subsidy, a parent earning minimum wage would still need to pay about a third of her monthly income to afford family coverage. Mulkey says that to make the COBRA coverage more affordable, the subsidy needs to be higher.
Rohan Vaidya earns far more than minimum wage. He was laid off from the software giant Oracle in January. His COBRA subsidy expires in November, and his health coverage will go from $140 a month to $400. Vaidya says he will switch to a cheaper plan.
"I'm 28 years old. I'm relatively healthy, so I don't need comprehensive everything — health, dental and vision," he says. "So something basic is what I'll sign up for."
Under current plans, the COBRA subsidy will expire Dec. 31. Congress may consider extending the subsidy early next year, though there are no details yet on how long it might last.
But all this could be moot if Congress passes even a modest health care bill. Unemployed workers and others who are uninsured could be given a choice of more affordable health plans. There would be government subsidies for those who can't afford it, and insurance companies couldn't deny families like Pelton's because of pre-existing conditions.
In effect, the need for COBRA could simply go away.