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Many unemployed are reeling from end to COBRA health-insurance subsidy

Monday was a bad day for unemployed Americans whose nine-month federal subsidy for health insurance expired.

Lyle, a diabetic and out of work since February, writes that he let his COBRA policy lapse. Becky writes that Monday was the second-worst day of her life, when she paid $1,249 — “more than my mortgage” — to cover her family’s health insurance for December. The worst day was in February, when she lost her job.

Lyle and Becky are among commenters on The Hill’s Briefing Room blog about the expiration of a 65 percent subsidy authorized in February by the American Recovery and Reinvestment Act (ARRA).

Although bills were introduced in Congress in October and November to extend the subsidy through June 2010, they’re still in committee. Sen. Al Franken, D-Minn., said today that he and other senators have been trying to get the subsidy reinstated but a couple of issues are holding it up: the massive health-care reform bill before the Senate and concern about the impact on employers.

“It puts the burden on the employer because they’re the ones that are having to do all the paperwork and stuff,” said Franken, a member of the Senate Health, Education, Labor and Pensions Committee. “We’re trying to figure out a way to do this — and especially if people dropped it after losing their subsidy. We have to write it in a way that they can be reinstated and that again makes it very difficult for the employer. That’s the thing we’re trying to think through.”

The Senate’s proposed COBRA Subsidy Extension and Enhancement Act of 2009 would increase the subsidy to 75 percent of the premium.

Calls coming in
Franken’s office has received 200 letters from constituents about the expiration of the COBRA subsidy and is tallying about six telephone calls per day.

Sen. Al Franken
MinnPost photo by Jay Weiner
Sen. Al Franken

“I raised it [COBRA subsidy] a couple of weeks ago and it just didn’t get done,” he said. “I think it got swallowed up in some of the other reform.”

In a Nov. 19 floor speech, Frankin said: “The last thing Congress should do is pull the plug on benefits before folks have had a chance to get back on their feet.”

The original nine-month ARRA subsidy is available to those laid off between Sept. 1, 2008, and Dec. 31, 2009. Minnesota also has used stimulus money to subsidize 35 percent of the remaining cost for 1,108 households whose income would qualify them for public insurance programs, said Karen Smigielski, a spokeswoman for the Minnesota Department of Human Services.

A Families USA report [PDF] released Tuesday finds the average COBRA premium (without a subsidy) for a family eats up more than 83 percent of the average monthly unemployment insurance check. In Minnesota, such a premium accounts for 72.8 percent of average monthly unemployment benefits.

“The bottom line here is that for many people the COBRA subsidy is coming to an end,” said Ron Pollack, executive director of Families USA, in a teleconference with news media on Tuesday. “It has been a lifeline that has allowed people to retain coverage, and that lifeline is now being withdrawn.”

While the nonpartisan Congressional Budget Office estimated that 7 million Americans would take advantage of the subsidy, it is not clear how many actually have, Pollack said.

Subsidy is a tax credit to employers
The subsidy is in the form of a tax credit that goes to employers who pick up the COBRA costs and file the paperwork Franken says is an issue. Some Democrats are pushing for the extension to be included in a jobs stimulus package.

“Again, it’s a little bit messy because people who have dropped it now won’t have had continuous coverage, which is what COBRA really is for,” Franken said. “So, if you put a thing in there saying ‘reinstate those people’ it puts a tremendous burden on the employer.”
COBRA is the acronym for the Consolidated Omnibus Budget Reconciliation Act of 1985. The act allows unemployed workers or those switching jobs to continue their employer-sponsored health coverage for up to 18 months as long as they shoulder the entire cost. Since employers typically pick up 65 percent or more of workers’ insurance premiums, the unemployed frequently find it unaffordable on their own. A January Commonwealth Fund brief [PDF] estimated that 9 percent of eligible candidates are covered by COBRA.

Best chance in House
The best chance for quick action on the subsidy extension, Pollack said, is in the House of Representatives, which already has passed its health-care reform legislation. The Senate began debate this week on its 2,000-page reform legislation.

“The good news is that the White House has expressed its support for extending the subsidy,” he said, adding that the president and Congress remain concerned about adding to the deficit. The CBO said the ARRA subsidy would cost about $27 billion.

Long term, Pollack said, health-reform proposals would allow the unemployed to buy subsidized health insurance in an exchange. In the short term, Americans who’ve left a job are faced with the cost of COBRA or going without health insurance unless they qualify for a public insurance program.

Becky, the commenter, writes that she had no choice but to pay the full COBRA premium this month. “My husband has a pre-existing condition (cancer) so I had no other option. What a nightmare.”

Casey Selix, a news editor and staff writer for, can be reached at cselix[at]minnpost[dot]com. Follow her on Twitter.

Comments (1)

  1. Submitted by Tim Nelson on 12/03/2009 - 09:42 am.

    A massive welfare program for the unemployed.

    Sooner, or later.

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