Explaining COBRA

Let’s have some straight talk from the media

The ways in which laid-off workers will be helped under the stimulus bill’s COBRA provisions continue to be of great interest to people looking for ways to keep their health coverage. So we were pleased to see CNN and The Wall Street Journal tackle the topic.

CNN’s breezy, geared-to-the-younger-set story zipped through a bunch of options like free clinics, prescription drug programs, SCHIP, getting a part-time job at Starbucks (because it offers health insurance), and COBRA. Ah, COBRA! CNN.com anchor Reggie Aqui and senior medical correspondent Elizabeth Cohen bantered about how expensive COBRA is, and noted that maybe you didn’t need all those expensive COBRA benefits anyway. Cohen suggested that people might be better off buying their own policies, which might be cheaper. She advised viewers that private coverage would be almost as good as COBRA—a debatable point, depending on what you can afford. Cheaper policies generally cover less.

Cohen warned that unless you’re in almost perfect health—perhaps CNN’s young viewers are—getting a policy in most states can be tough. She plugged her online column that, she said, gave a link for “sort of COBRA-made easy.” The link under her column’s COBRA section led to a Department of Labor site, which offered a set of frequently asked questions on COBRA.

The Journal’s story was well, more serious, offering more context and more specifics about the provisions in the stimulus law. The story explained that the COBRA subsidy in the stimulus law not only protects people from ruinous medical bills, but “also from the inability to get new insurance due to a pre-existing medical condition.” Great, I thought, and spotted the subhed I was looking for: “Portability Rights.” I read on. The Journal told readers:

The Health Insurance Portability and Accountability Act of 1996—generally limits the ability of group health plans to exclude someone because of a pre-existing medical condition. But it only applies if you have been continuously covered by a health insurer with a break of no more than 63 days. That’s where Cobra comes in. “People often unknowingly invalidate their federal portability rights by not taking Cobra or inadvertently exceeding the 63 days,” says Janet Trautwein, chief executive of the National Association of Health Underwriters, a trade group of health-insurance brokers and agents in Arlington, Va.

Only a health underwriter (aka insurance agent), or a benefits consultant, or an employment lawyer would understand that. The Journal might as well have been writing in Greek. Yet the plan’s portability rights are some of the most important things folks should know about COBRA. Here’s our translation:

Enrolling and staying on COBRA gives you protection and rights you otherwise wouldn’t have. Let’s say you have a medical condition and don’t get a new job that offers insurance—but you know you still need coverage. The law protects you only if you sign up and stay on COBRA for the full eighteen months the law allows. After leaving COBRA, you must apply for new health insurance in the individual market within sixty-three days. There are a few exceptions, but generally if you satisfy these two requirements, any company must sell you a policy regardless of any preexisting conditions you might have.

Some states, though, may send you to their high risk pools instead. If you don’t complete eighteen months of COBRA, or if you wait too long to apply for coverage, you’re out of luck. Insurers can turn you down for any reason—even if you were sick years ago and no longer have that medical condition. You may end up with no insurance at all.

One more thing: Even if an insurer agrees to sell you a policy, it can refuse to cover a condition you had in the past or have now.

At least the Journal tried to explain the provision. CNN ducked it. So did the U.S.Labor Department, for that matter. The gobbledygook FAQs that CNN linked offered no mention of this crucial requirement. Nor was there any mention of it on another Labor Department site that gave another set of FAQs for those interested in the stimulus package subsidy. “This is your life line into the individual market, and press coverage has not focused on those issues,” says Mila Kofman, Maine’s insurance superintendent and a COBRA expert. “This right to coverage in the individual market is critical for anyone who has had a medical condition now or had one in the past.”

So what’s the takeaway for anyone wanting to use the subsidy? Yes, the government will pay about two-thirds of your COBRA premiums, and for most people that might make the cost of insurance bearable for the nine months the subsidy lasts. But what happens after that? The Labor Department FAQ makes it clear:

If you plan to continue your COBRA coverage after the premium reduction period, you will have to pay the full amount of the premium. Failure to do so may result in your loss of COBRA coverage.

“If a new job with health insurance doesn’t materialize, a person would have to continue to pay all the premiums for the next nine months, and then go to the individual market,” explains Kofman. “That’s the only way to guarantee your right to a policy in most states.” So maintaining coverage beyond the initial nine months is important to most people with health conditions, even minor ones.

While these rules may seem draconian to consumers, they protect insurers by making certain that too many sick people don’t come into their mix of policyholders. If these people showed up, carriers would have to pay out gobs of money in claims, which could affect their bottom lines. Welcome to health insurance—American style.

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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.