The House version of the economic stimulus package being debated in Congress includes a couple of little-noticed provisions that could be lifesavers for people who lose their group health coverage when they lose their jobs.
Theoretically, laid-off workers can take advantage of COBRA, a decades-old federal law that allows people to stay in the group plan from their old job for up to 18 months. But there’s a huge catch: You have to pay the entire premium yourself, instead of the 20 to 30 percent of it that you were probably contributing while you were working. And what premiums! The average individual plan costs $4,798 a year, and the average family plan, a hair-raising $12,932–more than 80 percent of the average unemployment benefit. No wonder that less than one in 10 people who are eligible for COBRA actually end up buying it.
Alternatives to COBRA are no better. Individual health insurance policies are expensive, typically have stingier benefits than group plans and may be unavailable or unaffordable to people in less-than-optimum health. People in their late 50s and early 60s are typically the hardest hit, because they’re more likely to have chronic conditions like high blood pressure that make them hard to insure at an affordable price.
The House bill would help in two ways:
- The government will subsidize 65 percent of the total COBRA premium, for up to a year, for people who are involuntarily laid off from their jobs or have their hours reduced to the point that they no longer qualify for benefits.
- People who have worked for the same employer for at least 10 years, or are at least 55 years old, can stay on COBRA (paying the full cost) until they get on Medicare. People who quit their jobs voluntarily would be eligible for this benefit, along with people who are laid off. (By the way, family members covered under an employee’s group plan could also take advantage of both of these provisions.)
The bad news is that the bill the Senate is debating only offers 9 months of the subsidized coverage, and doesn’t contain the second feature–extension of COBRA until Medicare age–at all.
Also, these provisions don’t offer any help for people who weren’t eligible for COBRA in the first place. That includes people who work at companies with fewer than 20 employees, and, of course, people who never had group coverage from their employers.
—Nancy Metcalf, senior project editor
Read more on the COBRA subsidy. Have you had any experience with COBRA or have thoughts about the provision in the House or Senate Stimulus bills? If so, share your story below.