Home

COBRA Update:    Congress has just given a big assist to millions of jobless Americans facing a tough decision: Do they reach into their wallet to continue health insurance coverage with their old employer or not? As part of the economic-stimulus package signed into law this week, the federal government will provide a nine-month subsidy covering 65% of the Cobra premium for people who qualify. Eligible workers who originally opted not to take Cobra but who now want the subsidized version have 60 days after they receive notice from their employers to sign up, says Richard G. Schwartz, a benefits lawyer in New York. Fewer than one in 10 eligible workers recently opted for continuing insurance coverage in 2007 under Cobra, the federal law that allows many workers to continue group health insurance when they leave a job. The big reason: Cobra is expensive. Under the law, workers must pay the entire premium -- plus a 2% administrative fee -- even though employers typically picked up the lion's share of the cost. The average cost of Cobra coverage for a family is $13,000 a year -- big money for someone who is unemployed.

     The new subsidy applies to workers involuntarily terminated between 1 SEP 08 and 31 DEC 09, and phases out for individuals with an adjusted gross income of $125,000, and $250,000 for married couples filing jointly. It should make it easier for people to protect themselves not only from ruinous medical bills, but also from the inability to get new insurance due to a pre-existing medical condition. That's because an often-overlooked federal law -- the Health Insurance Portability and Accountability Act of 1996 -- generally limits the ability of group health plans to exclude someone because of a pre-existing medical condition. But it only applies if you have been continuously covered by a health insurer with a break of no more than 63 days. That's where Cobra comes in. "People often unknowingly invalidate their federal portability rights by not taking Cobra or inadvertently exceeding the 63 days," says Janet Trautwein, chief executive of the National Association of Health Underwriters, a trade group of health-insurance brokers and agents in Arlington, Va.

     As part of the stimulus law, lawmakers also enacted a provision allowing laid-off workers to switch to cheaper health-care plans in Cobra, if their employers offer them, without having to wait for an open-enrollment period. That might also help some people who chose the more-expensive health-care plans offered by their employers when they had their jobs. The unemployment rate jumped to 7.6% in January, up 2.7 percentage points from a year earlier. Cobra, however, generally doesn't help workers in companies with fewer than 20 workers, or those who have lost their insurance because their companies were liquidated or whose jobs never offered it, according to the U.S. Department of Labor. Many states extend state Cobra benefits to groups of fewer than 20 workers. Employers may not be happy with the expansion of the Cobra program, as some fear it will raise administrative and other costs. "The new law will impose very large costs on employers," says John Goodman, president of the National Center for Policy Analysis, an independent think tank in Dallas. "It will make it more expensive for employers to provide health insurance. And, for those who do, it will make it more expensive to hire new workers."

     For some people, especially the young and healthy, another option is to take out an individual health policy. Insurers such as Aetna Inc. have been promoting individual plans as Cobra alternatives in many states. Health-insurance experts advise people who lose their jobs to apply immediately for individual health insurance, because it can take weeks to have an application approved or denied when medical underwriting is involved. They can then choose whether to use Cobra or opt for individual insurance or a public program within the allowed time limit. Yet for employees who already have been diagnosed or treated for a serious or chronic illness, or who are pregnant, Cobra may be the only reasonable option. They may find it impossible to get an individual health-insurance policy, unless they live in a handful of states such as New York or New Jersey that require insurers to issue policies regardless of health or risk status, or in the more than 30 states with high-risk pools.

     Even then, individual policies may be prohibitively expensive. A Web site that lays out many private and public insurance programs is available at www.coverageforall.org, a project of the Foundation for Health Coverage Education, a nonprofit group funded by health insurers and foundations, and at the industry-funded www.nahu.org. Individual health-plans can be compared at sites like www.ehealthinsurance.com, an online insurance broker licensed in 50 states. [Source: The Wall Street Journal M.P. McQueen article 19 Feb 09 ++]