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.