Anyone whose bank account has ever felt the fangs of a COBRA health-insurance premium understands why grant writer Clarence White decided he couldn’t afford to fork out $600 a month after losing his job in December.
But thanks to a provision in the American Recovery and Reinvestment Act (ARRA), White is now eligible for a 65 percent reduction in the cost of COBRA, meaning his monthly premium would run $210 for nine months, then revert to $600 for the next nine months. White, 45, says thanks, but no thanks: “It’s still a lot of money relative to unemployment pay.”
His reluctance prompts this question: What if they offered a federal health-insurance subsidy to unemployed people and hardly anyone signed up? Some fear that’s a possibility, given the track record of a similar subsidy offered to dislocated workers. Meanwhile, at least one Minnesota HMO, Medica, is nudging the under-30 set to consider individual policies before opting for COBRA: “Even with COBRA subsidy, shop around” is the headline on some Medica ads.
Offers second opportunity for signup
The new COBRA subsidy is not perfect, experts acknowledge, but it’s a start. It covers people who lose their jobs between Sept. 1, 2008, and Dec. 31, 2009, and it offers a second opportunity to sign up for COBRA to those, like White, who initially declined because of the steep cost.
“For sure, it is a Band-Aid, but it’s a way to stop more and more people from becoming uninsured during a particularly bad time of the economy,” said Cheryl Fish-Parcham, deputy director of health policy for Washington, D.C.-based Families USA, a nonpartisan group dedicated to affordable health care. Families USA started pushing for a COBRA subsidy last fall when millions of Americans started losing their jobs. In a study released in January, the group cited research that 1.1 million more people become uninsured each time the unemployment rate rises 1 percentage point.
COBRA, or the Consolidated Omnibus Budget Reconciliation Act of 1985, lets unemployed workers continue their employer-sponsored health coverage for up to 18 months as long as they shoulder the entire cost. The only problem is it’s too expensive for many to pick up the extra 65- to 75 percent that their employers paid. Consequently, only 9 percent of eligible candidates are covered by COBRA, according to a recent Commonwealth Fund brief. (PDF)
The Families USA study, titled “Squeezed! Caught Between Unemployment Benefits and Health Care Costs,” (PDF) found that COBRA’s fangs devour a huge amount of unemployment insurance. Nationwide, COBRA can eat up 83.6 percent of average monthly unemployment insurance for family coverage and 30.4 percent for an individual. Minnesotans get more of a break: Average family coverage ($1,070) under COBRA eats up 69.9 percent of monthly unemployment ($1,530); individual coverage, 24.5 percent ($375) of UI income.
So, shouldn’t this new 65 percent reduction in COBRA entice more people to sign up? Not if the track record of the federal Trade Adjustment Assistance program (TAA) is any indication.
TAA break enticed only 15 percent
Though TAA has offered a 65 percent break on health-care premiums for people whose jobs leave the country, only 15 percent of eligible candidates have opted in across the nation, according to a study by the Urban Institute. The ARRA legislation increases that subsidy to 80 percent.
“That [increased subsidy] tells me they recognize that there’s under-utilization” of the TAA subsidy, says Joe Crowe, executive director of Quality Career Services in St. Paul. Crowe says he has yet to meet a dislocated worker who has taken advantage of the TAA subsidy in his many years of retraining unemployed clients and advising them to maintain their health insurance.
Their decision comes down to covering mortgages and other expenses on unemployment insurance that maxes out at $566 per week for the higher-paid workers in Minnesota. “It seems a lot of dislocated workers have rather large mortgages,” Crowe observes.
Is Crowe skeptical that people will take advantage of the COBRA subsidy? “Yes I am, and I hope I’m wrong.”
In the past, Crowe and his job counselors have pointed workers to “stop-gap” wellness care in the Twin Cities such as Portico Healthnet, St. Mary’s Health Clinics and the Neighborhood Health Care Network.
But heaven forbid any of the uninsured and unemployed develop a major health issue.
“It’s a HUGE risk,” says Fish-Parcham of Families USA. “If you play the cards wrong, you’ve really lost — big time.”
Medica offers individuals alternatives
Medica is putting some new cards on the table for the folks who are recoiling from COBRA’s costs even with that nine-month subsidy. The Minnetonka-based HMO launched a campaign (PDF) Feb. 9 after consumer testing last fall revealed that “very few people knew there were alternatives” to COBRA, said Craig Ashby, Medica’s director of individual products.
“It’s really prompted by what’s going on in the economy,” he said. “The subsidy has been in the news so much, and it has brought more visibility to the acronym COBRA. The whole point of the campaign was for people to explore their options. If COBRA is best for that person, that’s just fine. We want people to be in the best option for them, truly.”
Medica offers a comparison of the costs of COBRA and individual policies after all the deductibles, premiums and subsidy are factored into the equation, Ashby said. The campaign appears to be paying off: His division just had its best month since last spring. The HMO entered the individual market five years ago, but the biggest growth has occurred in the past two years as employer-sponsored health plans have declined, he said.
While Medica is recruiting the under-30 set with its Solo plan, health-policy experts caution that older people with pre-existing conditions need to seriously consider COBRA.
“The protection you have with COBRA is that you continue the insurance your employer had, and after that is over, you’re guaranteed to get into some state mechanism,” Fish-Parcham said. In Minnesota, that would be the Minnesota Comprehensive Health Association. “The Minnesota high-risk pool has some affordability protections in it.”
Skeptical of choosing large deductibles
She’s also skeptical of shopping around for cheaper individual policies. “If it’s cheaper because there’s a large deductible, you have to think about the harm that would come to you if you need services and can’t afford to pay to meet your deductible,” she said. “We hear those horror stories where a person has to show the provider in some cases that they can pay their share before the provider will agree to see them. It’s a very scary situation to be in.”
White, the grant writer, says he didn’t take lightly the gamble of going without health insurance. Just before his job ended, he went to the doctor to “make sure that I didn’t need anything immediately.” He doesn’t have any pre-existing conditions that would exclude him from future coverage and he doesn’t live a “high-risk lifestyle.”
Like the title of the Families USA study, he felt squeezed. “It’s a car repair or COBRA. It’s groceries or COBRA. It’s the phone bill. It’s transportation. It’s rent. It’s all of those things, and it’s not in the budget. There really isn’t a good solution. COBRA was the least affordable and imminently the least necessary. I know that can change in a moment, but the other stuff wasn’t a choice — rent, being able to eat.”
Luckily for White, his former nonprofit employer in Minneapolis just rehired him and he expects to be re-enrolled soon in an insurance plan that costs him about $125 a month.
“If I had to go longer without health care than I had, I think the only responsible thing would be to figure out something like Minnesota Care or something else,” White said.
Fish-Parcham of Families USA acknowledges that the COBRA subsidy still won’t be affordable to everyone.
“We think it’s a wonderful help to many people and that it’s not enough help and people need more,” she said. “We hope that people will take advantage of it as much as they can and hope they’ll keep telling their officials what else they need.”
Casey Selix, a news editor and writer for MinnPost.com, can be reached at cselix[at]minnpost[dot]com.