Family Health Insurance to Rise Sharply Without COBRA Subsidy

Washington – A new study estimates that the end of a hefty government subsidy could force millions of laid-off workers to pay more than 80 percent of their monthly unemployment checks to keep their job-based family health insurance coverage intact.

An estimated 7 million jobless workers and their dependents are thought to have received the temporary subsidy, which pays 65 percent of their health insurance premiums under a law known as COBRA, the Consolidated Omnibus Budget Reconciliation Act.

However, the nine-month subsidy expired Monday for those who first began receiving it in March through the American Recovery and Reinvestment Act.

Estimates vary, but COBRA subsidies pay an average of $722 per month toward the average national cost of family coverage, which runs about $1,111 per month, according to Families USA, a liberal consumer health advocacy group.

Without the subsidy, however, COBRA family coverage would eat up a whopping 83.4 percent of the $1,333 average monthly national unemployment insurance benefit, according to a Families USA report issued Tuesday.

In nine states, the full COBRA family premium exceeds the average monthly state unemployment benefit, the study found.

The situation is worst in Mississippi, where the average unsubsidized COBRA premium of $1,027 for family coverage is 22.4 percent more than the average monthly unemployment benefit of $839, which is the lowest in the nation.

The other states in which the average COBRA family premiums top the average monthly unemployment benefit are Alabama, Alaska, Arizona, Delaware, Florida, Louisiana, South Carolina and Tennessee.

Congressional Democrats are pushing to include some type of COBRA subsidy extension in a major jobs bill that’s being crafted. Rep. Joe Sestak, D-Pa., and Sen. Sherrod Brown, D-Ohio, have introduced stand-alone legislation to extend the subsidies in the House of Representatives and the Senate, but it’s unclear how soon any new funding can be secured.

In the meantime, many jobless Americans may be left with the difficult choice of paying higher rates at a time of dire financial struggle, going without coverage or looking for cheaper coverage through government programs or the private market.

“For millions of laid-off workers and their families, the federal COBRA subsidies have been a health-coverage lifeline. It is essential, therefore, that new jobs legislation extends those subsidies,” said Ron Pollack, the executive director of Families USA.

In general, COBRA allows certain workers who lose their jobs — unless they were fired for gross misconduct — to continue their health insurance with their former employers for up to 18 months. Before the subsidy was offered, only about 9 percent of people who were eligible took advantage because it was so expensive.

A study by Hewitt Associates found that the number of those who took advantage of the cheaper COBRA insurance has doubled since the subsidy became available in March.

In Milford, Ohio, Tim Wolffrum’s monthly COBRA premium for individual coverage will go from $146 to $417 per month when his subsidy expires Dec. 31. That’s in line with the Families USA estimate that COBRA premiums average $396 for individuals, while the average subsidized premium is $139.

Wolffrum, 58, said he’d like to see the subsidy extended, but that strong Republican opposition to the health care overhaul and government spending in general makes it unlikely. The Joint Committee on Taxation estimated that the current subsidy would cost nearly $25 billion and cover about 7 million people this year.

Wolffrum said he understood the reluctance to spend, but that he was frustrated nonetheless.

“I see all the aid we send other countries all across the world and we don’t take care of our own right here,” he said.

Wolffrum lost his job as a retail representative for the R.J. Reynolds Tobacco Co. in October 2008 as part of a corporate downsizing.

The extra $271 per month for COBRA premiums means he’ll pay more than 25 percent of his roughly $1,200 in monthly unemployment benefits for health insurance.

He can’t afford to drop it, however, because he can’t find cheaper coverage in the private market because of his pre-existing ailments, which include a 2007 heart attack and a recent stomach surgery. Under COBRA, his prescription blood pressure and cholesterol medications total $28 per month. Without insurance, they’re $181 per month.

Wolffrum said he’d use his savings to make up for the increased premiums.

“I don’t really have an option at this point,” he said. “I’m hoping that by springtime things will pick up and maybe I can find a job where they offer health benefits. But I don’t know if that’ll happen or not.”