Jobless Hit as Expiring Subsidies put COBRA Out of Reach

The Tennessean
Aug. 27, 2010
By Bonna Johnson

Teresa Beazley had paid $189 a month for government-sponsored health insurance since she was laid off last year from her job in the accounting center of a major grocery store chain.

Last month, though, the Hendersonville woman got a jolt when her bill more than doubled to $453 a month.

"I was sort of in a bind," the 59-year-old Beazley said. "I have to have health insurance, so I went ahead and paid it." She's not sure she can afford to pay the higher bill again.

Like thousands of others still out of work and with no job prospects in sight, Beazley finds herself caught in a gap created when a subsidy to help cover COBRA health insurance premiums for the country's unemployed ran out this summer.

People who started on COBRA before May 31 can get the federal 65 percent subsidy for 15 months. Those who have exhausted the subsidy or have been laid off since the end of May are out of luck, and must pay the full freight on their own for the year and a half that people between jobs are eligible for COBRA.

Beazley is angry that the subsidy has run out for many while unemployment rates remain stubbornly elevated in much of the state and nation.

"There's no nice way to put it, especially at my age," she said. "I did not ask to be laid off."

In Tennessee, the statewide unemployment rate was 9.8 percent in July - still high but the first time it has fallen below double digits since February 2009. The 13-county Nashville area registered a jobless rate of 8.8 percent for the month; while Davidson County alone had a 9.3 percent rate, according to labor data released Thursday.

COBRA - the Consolidated Omnibus Budget Reconciliation Act of 1985 —allows people who have lost their jobs to stay on their former employer's health plan if they pay the entire premium, plus a 2 percent administrative fee, usually for 18 months.

Although costly, it's typically less expensive than private insurance available to individuals and their families who aren't on employer-sponsored plans.

Last year, Congress approved the COBRA subsidy, which was funded by the federal stimulus. Advocates for workers had hoped Congress would expand the subsidy when it extended jobless benefits this summer - but that didn't happen.

It remains unlikely that Congress will act this year, political observers said. Still, Sens. Sherrod Brown, D-Ohio, and Robert Casey, D-Pa., have introduced legislation to reinstate the subsidy and pay for it by eliminating a tax break for annuity trusts. The proposal would be retroactive, giving people who lost jobs on June 1 and thereafter six months of help.

'Not a normal time'

Without the subsidy, some families are committing upward of 84 percent of their unemployment benefits each month to health insurance premiums, said Cheryl Fish-Parcham, deputy director of health policy at Families USA, a New York-based consumer group.

"People can't afford coverage on their own, especially when they've been laid off," Fish-Parcham said. "In normal times, people keep COBRA for a short period of time between jobs, but this is not a normal time."

COBRA premiums average more than $1,000 a month for family coverage and $400 for individuals. With the subsidy, it's a more affordable $377 for a family and $140 for an individual, consumer studies show.

It is estimated that 144,000 Americans a month are losing out on the subsidy, making health care more difficult to afford, according to the National Employment Law Project, a nonprofit organization that advocates for low-wage workers.

A recent analysis shows that the average COBRA enrollment rate dropped to 21 percent in June, after the subsidy expired, compared with an enrollment rate of 25 percent during the period the subsidy was available to laid-off workers.

Still, that rate of COBRA enrollment is higher than the historical monthly average COBRA enrollment rate of 12 percent, according to a report by Hewitt Associates, a human resources consultancy.

"With the unemployment rate close to 10 percent, more Americans have to turn to COBRA as a way to access health insurance, especially for workers who are involuntarily terminated and either don't have a new job right away or don't have a job with an employer-provided health plan," said Karen Frost, a Hewitt research leader on health and welfare issues.

She predicts enrollment rates will decline over time as workers cannot or are not willing to pay the higher premiums associated with COBRA coverage.

"Workers who enrolled in June anticipating the subsidy would be extended may subsequently drop coverage now that it is clear they won't be able to offset the high cost of COBRA," Frost said.

Beazley, who receives unemployment benefits, said she might be eligible for a private insurance policy at $300 a month from a national insurance company. She has been solicited by phone by other companies, but she does not recognize their names and fears some of the come-ons could be scams. Health insurance scams have become more frequent during the recession.

"I want to cancel COBRA, but I need to make sure I have something else first," said Beazley, who has diabetes and high blood pressure.

Private plans too costly

Others say, subsidy or not, they need COBRA benefits because the private insurance market either is too expensive or won't insure them.

"The subsidy was wonderful when I had it, but the problem for me is my COBRA ends Oct. 1," said Cathy Phelan, who was laid off from her job as an events coordinator in March 2009.

Because she takes a blood thinner, high-risk private insurance plans could cost as much as $2,400 a month for her and her husband - a sum the couple say they can't afford.

With unemployment still so high, she thinks Congress should extend the time jobless workers like her can stay on COBRA or find more ways to create jobs. "They're not doing anything to alleviate the stress of high payments," Phelan said.