Steps to Take Before COBRA Subsidy Ends

New York Times

December 11, 2009

Roberta Mason, age 62, of Turner, Me., in a few weeks will lose the federal subsidy for her Cobra health insurance premium, which has helped her afford coverage since she lost her job early this year.

Laid off from her job as a supervisor in a shoe factory last January, Ms. Mason was able to keep her health insurance under the Consolidated Omnibus Budget Reconciliation Act, known as Cobra, largely because of a federal subsidy that helped make her payments relatively affordable, at $199 a month.

But the subsidy, which was part of President Obama’s stimulus package passed by Congress in February, lasts only nine months. And Ms. Mason’s time is now up. In January, her Cobra payment will increase to $550, which is more than half of her $908 monthly unemployment check.

Her husband, Douglas, 66, is retired and receives about $1,900 a month in Social Security. His health care is covered by Medicare. But if Ms. Mason has to pay the full price on Cobra, she and her husband will have little left over from their two checks for living expenses.

“For the past nine months I’ve been looking for another job,” Ms. Mason said. But, at 63, “who will want to hire me, let alone give me a job that provides health benefits?”

Ms. Mason certainly needs the coverage. Her medications for high blood pressure, high cholesterol and chronic bronchitis would add up to hundreds of dollars a month without insurance.

“I’ve tried to scrape some money together to take care of things when the Cobra subsidy ends, but it’s just not enough,” Ms. Mason said.

That government subsidy made Cobra a lot more affordable for millions of unemployed people like Ms. Mason. But now that the subsidy is ending for the first of its recipients, many don’t know where to turn. What is more, the way the stimulus act is written, the subsidy will no longer be available to any newly laid-off workers.

There are a lot of people, in other words, who need all the help they can get in coping with Cobra.

According to a report recently released by Families USA, a nonprofit health care advocacy group, Cobra premiums for family health coverage will cost laid-off workers, on average, $1,111 a month, which is almost 84 percent of the average monthly unemployment check those families receive.

In nine states — including Alaska, Arizona, Mississippi and Florida — full Cobra benefits exceed the amount of the average unemployment check, according to the report.

That is why the Cobra subsidy has been so important and why there is a big push in Congress to extend the benefit. Bills were introduced recently in the House and the Senate that would extend the subsidy for six months. Unemployed workers who have lost their subsidy would probably be grandfathered under the legislation and receive a refund for any unsubsidized premiums they pay before the legislation is enacted.

If those bills do not move forward, many experts predict that a Cobra extension will become part of the pending jobs bill, which would extend many of the benefits provided by the stimulus package, said Ron Pollack, executive director of Families USA.

President Obama seemed to confirm that prediction during a news conference Tuesday when he called for an extension of emergency assistance to the elderly, unemployment insurance benefits, Cobra, and relief to states and localities to prevent layoffs.

Of course, if your Cobra subsidy is ending in the very near future, all the promises in the world from Washington will not help you pay your premiums in the meantime. So, until there is some definitive action from Capitol Hill, here is what you need to do.

AVOID A LAPSE When your subsidy ends, you won’t get a lot of notice. Most likely you will simply receive your next Cobra bill in the mail for a much larger amount than you are accustomed to paying.

Our advice: Pay it, no matter how much you have to scrimp and borrow.

The reason is simple. If you do not, your Cobra coverage will end immediately. And then the clock immediately starts ticking on interruption of your health care coverage.

Under current law, if you have gap in coverage of 63 days or longer, any insurance carrier from which you might then seek coverage could use any pre-existing health care issues you may have — like back spasms or heart disease — as a reason to deny coverage or charge astronomical premiums far above even the expensive Cobra payments .

BUY TIME Yes, the full-price Cobra payments are onerous. But if you pay the first month or two, you will be buying time to see if the subsidy is extended and time to shop around for health insurance alternatives that may be more affordable.

Check ehealthinsurance.com and healthplanone.com for general pricing information from carriers that provide individual policies in your area.

STAY ON TOP OF IT If you’re making the switch to full payments be sure to keep in touch with your Cobra administrator so you will know whether Congress grants an extension, and what you need to do, if anything, to get it.

Depending on your plan and situation, this person may be a staff member of your former employer’s benefits department. Or it may be someone at the insurance company providing your Cobra coverage, or a third-party administrator. Be sure to read through your paperwork and find the person you need to stay in contact with.

LOOK FOR REDUCTIONS With or without the subsidy, family Cobra coverage costs much more than individual coverage or coverage for just you and your spouse.

Without your regular income, your children may well be eligible for the Children’s Health Insurance Program, known as CHIP. It covers children in families that earn too much to qualify for Medicaid, but too little to afford private health insurance. If you can insure your kids through CHIP, Mr. Pollack said, you can significantly reduce your Cobra payment. For more information go to insurekidsnow.gov.

NEWLY LAID OFF? If you have been laid off this month and your employer has promised to cover your health care until the end of December, beware: that magnanimity could work against you.

The way the law is written, workers are eligible for the subsidy only if they are “eligible for Cobra” before Dec. 31, said Kathryn Bakich, national health care compliance director for the Segal Company, a benefits consultant. And simply being laid off in December does not necessarily make you eligible, particularly if your employer-provided coverage is extended through the end of the year .

If you have already received a pink slip this month, or you get one, Ms. Bakich suggests contacting your benefits department immediately to see if there is any way your Cobra eligibility can begin this calendar year.

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