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COBRA Help For Laid-Off Workers May Come Before Christmas

Dec 18, 2009

Laid-off workers may soon get a reprieve from one of their worries.

A proposal to extend the health insurance subsidies for Americans who have lost jobs as a result of the recession is one step closer to gaining congressional approval. The proposal, which passed the House Wednesday night, is tacked onto both the House defense appropriations and jobs-creation bills and would give some unemployed Americans an extra six months of help paying for their COBRA coverage.

Congress has been under increasing pressure to extend the subsidy, which was first created in last spring’s American Reinvestment and Recovery Act. The Senate voted to shut off debate on the defense appropriations bill early this morning setting up a final vote, expected Saturday.

Federal law requires employers to offer continued health insurance to laid-off workers for as long as 18 months, though employees usually pay the full cost. The average monthly COBRA premium for a family costs $1,137, according to the Kaiser Family Foundation (KHN is a program of the foundation). That's more than 83 percent of the average unemployment check, according to a study by Families USA, a consumer advocacy organization.

The federal government has been paying 65 percent of the costs for Americans laid off between September 2008 and the end of 2009, bringing the average cost down to a more manageable $398 per month. Early on, the Joint Committee on Taxation estimated that about seven million people could be covered at a cost of almost $25 billion, though it's not clear how many people have gotten subsidies.

The subsidy was designed to last nine months. As a result, the assistance began to expire for some workers Nov. 30, leaving them to pay the full cost themselves. And the deadline for signing up, Dec. 31, is fast approaching.

The defense bill, which has the best chance for speedy passage, would extend the sign-up deadline until the end of February. The jobs bill, which will likely work its way through Congress early next year, would extend it until the end of June 2010. Both would lengthen the nine-month subsidy to 15 months and would be retroactive for those who already timed out.

A separate bill, proposed in November by Sen. Robert Casey, D-Pa., and Sen. Sherrod Brown, D-Ohio, would increase the subsidy amount from 65 percent to 75 percent.

Ron Pollack, executive director of Families USA, confident the extension will pass the Senate, said "it will mean that relief will be provided to people before the Christmas holiday."  

Pollack adds that while he's "delighted" that the measure passed the House, it isn't "a panacea," but rather a stop-gap measure. "Once health reform passes, this will no longer be a problem," he says. Even if a health overhaul does pass, however, subsidies on the exchange and other reforms will not go into effect for several years.

The House legislation was sponsored by Rep. Joe Sestak, D-Pa. In a press release, he said it is Congress' "responsibility to America's working families, who have suffered the most from the mistakes of others. They should not have to decide between trying to meet an enormous expense and going without health care."

Paul Fronstin, senior research associate at the Employee Benefit Research Institute, a nonpartisan research organization in Washington, says the anxiety is particularly high for those with health conditions. "We know from our surveys that health benefits are by far the most valued benefit in the workplace. It's not valued just for the sake of having it. It's valued because people use it."

Fronstin adds that even those who have new jobs may still be on COBRA. "I would assume that a lot of people have found jobs, but not a good job, as defined as the jobs that come with coverage."

A survey by Hewitt Associates, a benefits consulting firm, found that the percentage of laid-off workers who take COBRA has doubled since the subsidy began in March, from 19 percent to 38 percent. For employers, this has meant a lot of paperwork, says J.D. Piro, a principal at Hewitt's health law consulting practice. And if the subsidy extension passes, says Piro, "it's another six months of administering this COBRA entitlement. And when you mix that in with what's happening with health reform, it's going to be a busy year."

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