Monty Python might have devised COBRA as an ironic joke. Briefly, workers who are insured via their workplaces lose that insurance when they leave the job. A pink slip translates not just into a loss of income, but a loss of health insurance. Family disruption can also leave people adrift. Divorced and widowed spouses, as well as dependent children, lose insurance when they lose their connection to the insured worker.
In 1985, with the Consolidated Omnibus Budget Reconciliation Act, Congress came to the rescue, sort of. Briefly, COBRA lets laid-off workers keep their workplace insurance. Ditto for divorced and widowed spouses, and dependent children. The not-so-fine print, though, sets forth the condition: laid-off workers must pay 102% of the total premium (adding an administrative fee), not just the portion they paid when employed. So instead of seeing $150, for example, deducted from a monthly paycheck, workers face a premium double, triple, maybe quadruple that. The Kaiser Foundation’s survey of employers found that annual costs for a family policy topped $16,000 (http://kff.org/report-section/2013-summary-of-findings/). COBRA, moreover, offers only a reprieve. The law presumes that the worker (and/or dependent family members) will find another job, another link to insurance. COBRA limits benefits, generally, to 18 months. Disabled workers can latch onto COBRA for an additional 11 months, but they must pay 150% of the workplace premium.
From employers’ vantage, the higher premiums make sense. After all, why should an employer subsidize the insurance of a person who no longer works at the company? As for disabled ex-employees, they will be heavy users of medical care and, consequently, increase the costs of the employer’s “pool.” Making them pay higher premiums again makes sense.
At first glance, employers (and Congress) emerge as beneficent. An ex-employee who stays on a group policy pays far less than if s/he were forced to buy insurance on the “individual” market, where policies cost much more. Disabled ex-employees might pay even more; in fact, they might have a hard time finding an insurer. So Congress handed workers a benefit, sort of.
Of course, few laid-off workers, much less workers with disabilities, can pay the premiums. Their choice is not COBRA or an individual market policy, but COBRA or no insurance. Not surprisingly, ex-workers with limited, even moderate, incomes end up uninsured.
Although legislators touted COBRA as a benefit for workers, it is more an illusory sop – one that costs employers very little. Indeed, it is as though we asked Simon Legree to design a welfare system for workers, or Frank Capra’s Henry Potter to design a mortgage program for Potterville. On paper, workers have an option that costs employers little. Besides, given the onerous premiums, many workers refuse COBRA anyway. Unemployment checks just about cover rent and food – not hefty premiums. Imagine the corporate flunky who gives a recent widow the good news of COBRA at her late husband’s wake: for much more than she can afford, she can continue to insure herself and her children.
Cheers to the The Affordable Care Act (aka Obamacare). At last workers and their families will have a realistic chance to stay insured. Employees and their families who have lost their job-related insurance will have a choice: COBRA or a policy that they can buy through their state’s exchange. Those policies will be comprehensive. And even if the premiums are high, people earning up to 400 percent of the federal poverty line will be eligible for a subsidy. Depending upon income, a person might receive a subsidy as high as $5,000.
Happily, we can soon relegate COBRA to a footnote in this country’s history of cruel social programs.
Joan Retsinas is a sociologist who writes about health care in Providence, R.I. Email firstname.lastname@example.org.
From The Progressive Populist, November 1, 2013
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