With the job outlook grim, unemployed workers received an unexpected boost this week as President Obama signed legislation authorizing a six-month extension of the COBRA health care subsidy program that was part of the economic stimulus bill passed in February. "That makes me pretty happy," says Don Hall, 56, who lives outside Sandusky, Ohio. A supervisor with an MBA at an automotive parts supplier to Ford Motor Company, Hall was laid off in October 2008. He recently sent a letter of hardship to Wells Fargo to try to save his house from foreclosure. His subsidized COBRA payment has been $258 a month and he says not having to pay an additional $500 a month for health care coverage is a godsend. "When you have to draw straws between paying the utility bills, the mortgage and health care, it's hard."
"For millions of laid-off workers and their families, the federal COBRA subsidies have been a health-coverage lifeline," says Ron Pollack, executive director of Families USA, a non-profit organization for health care consumers.
Under the American Recovery and Reinvestment Act (ARRA), the federal subsidies pay 65% of the cost of COBRA premiums. Originally, the subsidy was to expire after nine months and unemployed families would have seen their health care premiums spike on average from $389 to $1,111 per month. This tripling of cost could have caused many families to drop their health care coverage just as Congress is on the cusp of passing the most far-reaching health care reform legislation in history.
Senator Sherrod Brown, the Ohio Democrat who authored the COBRA Subsidy Extension and Enhancement Act with Pennsylvania's Senator Bob Casey, also a Democrat, says the legislation will help the "many middle class families struggling to get by." Workers who were involuntarily terminated from their jobs between September 1, 2008 and Dec. 31, 2009 are eligible for the subsidy that helps individuals and families continue on employer-sponsored health insurance. The new legislation, part of the $636.3 billion fiscal year 2010 defense spending bill, extends the subsidy from nine to 15 months and opens the program to workers who will be laid off between Jan. 1, 2010 and Feb. 28, 2010 as well.
Former Admiral, now Congressman, Joe Sestak, a Democrat from Pennsylvania, told the House of Representatives, "Hardworking people who have suffered most from the mistakes of others should not have to decide between trying to meet an enormous expense or going without health care." With nearly 15 million Americans looking for work, Sestak said the health care bills being debated by Congress may eliminate the need for COBRA, but that those provisions, if included in the final bill that reaches President Obama's desk, may not take effect until 2013.
One of the late Senator Edward Kennedy's major accomplishments in the health care field, COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1986) enables discharged workers to stay on their employer's group health plan for up to 18 months. Unlike the Family and Medical Leave Act (FMLA), COBRA does not require the employer to pay the cost of providing continuing coverage. Instead, it allows employees and their dependents to maintain coverage at their own expense by paying the full price of the premium plus an administration fee. The Joint Committee on Taxation, a non-partisan group focused on government finance, estimates the existing nine-month Cobra subsidy program has helped provide health care coverage to approximately 7 million Americans in 2009 at a cost of $24.7 billion.
But with health care premiums skyrocketing the past two decades, many unemployed workers cannot afford COBRA. Across the 50 states, the average unsubsidized monthly COBRA premium of $1,111 gobbles up 83% of the average unemployment check of $1,333, according to a December report by Families USA. In nine states, the average COBRA premium exceeds the average unemployment benefit. In Mississippi, for example, the average unsubsidized COBRA premium is $1,027, while the average monthly unemployment check is $839. In 2009, the annual cost of the average health care plan in the United States was $13,375 for a family and $4,824 for an individual, according to the nonprofit Kaiser Family Foundation.
In Seattle, Washington, Natasha and Andrew Freidus have two small children, ages two years and four months. Andrew lost his job in the renewable energy field and the couple went on COBRA coverage, which costs $540 with the subsidy compared the full cost of $1,506. Andrew found a job with a start-up in the renewable industry in June, but the company cannot yet afford to offer health care so the couple has continued with COBRA. Natasha says she is very happy about the COBRA subsidy extension, not only because of the cost savings, but because this means she can stay with her current pediatrician. Natasha says, "We've both been depressed and angry about the health care reform bill being watered down, so it's nice to hear a little good news."
Tim Wolffrum, 58, of Milford, Ohio, worked for a Fortune 500 company before he was laid-off in October 2008. With his COBRA subsidy, he is paying $146 a month, which is about one-third of his unemployment benefits after taxes. He suffered a heart attack two years ago and also has diverticulitis. When he looked for new health care coverage, the plans would not cover his pre-existing conditions, the premiums were "outrageous" and the deductibles were $5,000. With the COBRA subsidy extension, he hopes the economy will pick up and he can find a position that offers health insurance.