Resuscitate COBRA Premium Subsidies to Help Unemployed, Commonwealth Fund Says

In the waning days of the COBRA premium subsidy, The Commonwealth Fund is calling for the program to be resuscitated as a way to help unemployed and uninsured workers until health care reform is fully implemented.

In an Aug. 24 issue brief,  the Fund noted that “the worst economic downturn since the Great Depression has taken an enor­mous toll on the U.S. job market.” The Fund added that since 60 percent of Americans get their health insurance through an employer, “the loss of a job can also result in the loss of health benefits, exposing individuals and families to potentially catastrophic health care costs in the event of a serious ill­ness or accident.” Here are some statistics from the brief:

• An esti­mated 15 million working-age adults lost their jobs and health benefits between 2008 and 2010; a majority of these individuals (57 percent) became uninsured.
• Workers with low incomes fared the worst and were the least likely to remain insured: 70 percent of adults earning less that 200 percent of poverty who lost their job and health benefits became uninsured, compared with 42 percent of those at or above 200 percent of poverty.
• One-quarter of adults were able to go on their spouse’s coverage or find another source of coverage, while 14 percent continued their coverage through COBRA.
• Nearly three-quarters (72 percent) of respondents who became uninsured when they lost their job and health benefits had at least one of these access problems: skipped a recommended medical treatment or follow-up test; did not get specialist or other physician care when needed or did not fill a prescription.
• In 2010, 58 percent of workers, or about 67 million people, would likely have been eligible for COBRA if they had lost their job and their employer health coverage.
• Unemployed workers with COBRA coverage face average annual premium costs of $5,049 for an individual and $13,770 for a family plan, based on average employer plan costs in 2010.

The Fund noted that “sweeping health insurance market reforms and the provision of subsidies [through the] Affordable Care Act will, upon full implementation in 2014, dramatically increase coverage options for people who lose their jobs” as a result of Medicaid expansions, tax credits, new state insurance exchanges, bans on pre-existing health condition limitations and exclusions, and other provisions.

But that’s still several years away, and support is needed in the interim. So the Fund stated that Congress could resuscitate the COBRA premium subsidies enacted under the American Recovery and Reinvestment Act (ARRA), which “substantially offset costs for unemployed workers by covering 65 percent of their COBRA premiums” — but as discussed here, expire in a few days.

Also, the Fund indicated that the overall COBRA coverage option will still be needed even when the reform provisions are fully implemented for the following reasons:

• Continuing coverage from a prior job saves the administrative costs generated from churning in an out of different health plans.
• The ability to stay on one’s employer coverage would enable people to avoid penalties from violating the reform law’s “individual mandate” requirement to have health coverage. (For an update on legal challenges to that provision, go here.)
• A COBRA option might reduce the risk of adverse selection, which occurs when people in poorer health buy plans in greater numbers than those in better health, thereby increasing premiums for all individuals participating in the insurance exchange.

“However, … to make COBRA a financially viable option for people, the federal government would need to provide tax credits to offset the cost of coverage. Policymakers and regulators might consider allowing people with COBRA continuation coverage to have access, for a limited time, to the sliding-scale tax credits that are available for qualified health plans offered in the exchanges,” according to the Fund.

Information on COBRA’s requirements and the premium subsidy law can be found in Mandated Health Benefits — The COBRA Guide.  Answers to key questions on the health reform law are available in The New Health Care Reform Law: What Employers Need to Know (A Q&A Guide), 2nd Edition.