COBRA and Health Care Equity

It’s time for the press to connect some dots

Remedies for America’s diseased health system tend to come incrementally—an approach that doesn’t disrupt the status quo but never quite provides everyone with insurance. In 1965 came Medicare for old people and Medicaid for those poor enough to qualify; in 1985 came COBRA, a continuation of employer-provided coverage for workers losing their jobs; in 1997 came SCHIP for very poor children. Two weeks ago, a SCHIP expansion added four million more children to the rolls—leaving out a few million who will remain uninsured.

As the economic stimulus package makes its way to the President’s desk, the press needs to realize that the bill, despite the hype surrounding it, may end up leaving more people falling through the cracks. Conventional wisdom holds that people should keep their COBRA benefits a little longer, beyond the eighteen months that the law now allows. But because COBRA requires its beneficiaries to pay all the premiums plus a two percent administrative fee, most out-of-work people don’t join the program. Premiums, which average about $12,600 annually for a family, are impossible to pay when the breadwinner has no job. To quantify what health experts have known for years, a newly released report from The Commonwealth Fund found that in 2006, before the downturn, only 9 percent of those eligible signed up for COBRA.

In last Thursday’s piece about money troubles for state Medicaid programs, The New York Times simply reported that the House stimulus proposal would permit those unemployed who are at least age fifty-five or who have been at the same job for ten years to keep their COBRA benefits at their own expense, until they go on Medicare at age sixty-five, or get health coverage from another employer. But what about someone who is fifty-four, or someone who has been on the job only nine years? The Times said that, for the first twelve months of coverage, the federal government would pay 65 percent of COBRA premiums for those who have lost their jobs since September 1. But what about those laid off on August 15? And what if someone still can’t swing the rest of the premium? Do any of these people need health care any less than those who fall within the arbitrary boundaries for eligibility?

The Washington Post did a bit more dot-connecting than the Times. It consulted Urban Institute researcher Stan Dorn, who said that only 12 to 15 percent of dislocated workers took advantage of a similar provision authorized in trade legislation passed in 2002. Dorn predicted that a 65 percent COBRA subsidy could mean “there’s a very good chance the program will be a major failure.” The Post also quoted an analyst with the conservative Heritage Foundation, who said that, rather than let laid-off workers temporarily go on Medicaid (another proposed solution), the government might instead offer to help the states find private coverage for unemployed people—coverage which might be less generous and less expensive than they would get from Medicaid. Less expensive for the government, that is.

Opposition is surfacing to the proposed COBRA extensions. The influential National Business Group on Health (NBGH), comprised mostly of Fortune 500 companies and some large public sector employers, has sent a letter to House Ways and Means Chairman Charles Rangel outlining its objections. President Helen Darling told Rangel that, although the group supports temporary subsidies, extending the benefits for such a long period would hurt employers. Darling said “costs would significantly increase if people could keep COBRA longer as they approach Medicare eligibility and their health care costs generally increase due to higher medical costs and higher rates of chronic conditions.” Geez, that’s just when they need insurance.

Darling added that employers would have to keep track of their former workers, “collect premiums and process COBRA payments for many years until their long ago employees either relinquish their coverage or it expires…. The administrative burden for former employees,” she said, “would become permanent…at the expense of current employees and their employers.”

Oh, oh—the equity issue again. Darling’s letter signalls what we can expect once the lobbying gets hot and heavy. If employers are objecting to COBRA extensions for the unemployed because they might cost too much, what will happen when there are proposals on the table to make all large employers like NBGH members pay for coverage for their workers? There are lots of threads to tie up here. It’s best not to let them dangle too long.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman.