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What’s wrong with COBRA?

Posted by: Ron Pollack, Executive Director, Families USA on Jan 12, 2009

The new unemployment numbers issued on January 9 show that more and morepeople are receiving pink slips, and a report released on the same day byFamilies USA makes clear why those pink slips are being accompanied with a lossof health insurance. The report compares average Unemployment Insurance (UI)benefits with average COBRA premiums.

On average nationally, monthly UI benefits are $1,278 while average COBRAmonthly premiums for family coverage are $1,069 -- or 83.6 percent of UIchecks. For individual coverage, the average COBRA monthly premiums are $388 --or 30.4 percent of UI checks. These numbers are significantly different fromone state to another, so it's important to dig a bit deeper.

In 17 states plus the District ofColumbia, COBRA premiums for single coverage consume,on average, more than one-third of UI checks. In 41 states plus the District of Columbia,COBRA family coverage premiums, on average, consume more than three-fourths ofaverage UI benefits. In nine of those states, the average COBRA premium equalsor exceeds the average UI benefits. In Arizona,for example, average monthly UI benefits are $937 compared to average familyCOBRA premiums of $1,084 -- 116 percent of UI income.

Clearly, COBRA is great in theory and lousy in reality. This needs to befixed.

Thankfully, the incoming Obama Administration and leaders in the Senate andHouse are considering immediate help for the recently unemployed as part of theeconomic recovery package that is the top priority for legislative action. Thathelp may come in one or a combination of two forms. First, the recovery packagemay provide subsidies to make COBRA premiums more affordable; clearly, thosesubsidies need to be substantial if they are to achieve their purpose. Second,the recovery package may enable laid-off workers to gain temporary enrollmentin the Medicaid program with the federal government picking up the full tab.

As important as these measures are, they are onlyshort-term, partial fixes. The growing crisis makes abundantly clear whymeaningful health care reform should be an early, top priority. AsPresident-Elect Obama has correctly indicated, we can't fix America'seconomy without fixing health care -- and the latest problems so evident fromthe new unemployment numbers underscore this point once again. 

 

This post also appears on the National Journal Online as part of their Expert Blog feature.