A government subsidy that pays 65 percent of health insurance premiums for unemployed people who remain on their former employer’s plan is only temporary, and those who need coverage most may not qualify for other insurance after it ends.
Diane Nelson, 48, of Riverview, Fla., has terminal lung cancer and worries she’ll have to stop medical treatments once the subsidy her husband gets under the Cobra program ends in November. The couple has been paying $377 a month in premiums, but without the discount, their costs will rise to $1,100, she said.
“I’ve looked into other insurance, but I’ve been denied a couple of them because it’s a pre-existing condition,” said Nelson. Her husband, who was fired as a heavy-equipment mechanic in February, has found work as an auto mechanic but doesn’t receive health benefits, she said.
While health-care reform may make Cobra less relevant down the road, people like Nelson are focused on the near-term. The economic stimulus plan passed in February included the subsidy, valued at $24.7 billion, to reduce health-care costs for the growing number of fired workers, but it lasts for a maximum of nine months and is only available to employees who lose their job from Sept. 1, 2008, through the end of this year.
“I have no idea what I’m going to do come December,” said Nelson. They’ve depleted their 401(k)s and are “trying to keep our heads above water, but we’re slowly sinking,” she said.
The Joint Committee on Taxation estimates about 7 million people will use the subsidy for some part of 2009. Without the subsidy, people keeping their employer-sponsored plan typically pay the entire cost of the monthly premium, plus a 2 percent administrative fee.
Under Cobra, a 1986 law, workers can remain on their employer’s health plan for as long as 18 months. The average time out of work is 25 weeks and the number of Americans out of work longer than 27 weeks rose by 584,000 to 5 million in July, according to the Bureau of Labor Statistics.
Enrollments have doubled since the subsidy began, according to an analysis released Aug. 18 by Lincolnshire, Ill.-based Hewitt Associates.
“The subsidy has truly been a life saver, a major reduction of monthly bills,” said James Fisher, 59, of New York City, who pays about $150 a month for coverage. He was fired in February from Hetrick-Martin Institute, a non-profit counseling center for teens.
With the subsidy, the average family pays $377 a month, according to the Henry J. Kaiser Family Foundation of Menlo Park, Calif. The cost rises to $1,078 a month without it.
People with pre-existing conditions, like Nelson, may be rejected when applying for individual policies, or may pay more than they would under even unsubsidized Cobra, said Karyn Schwartz, a senior policy analyst for the Kaiser Family Foundation.
Still, for people without pre-existing conditions, individual plans are typically cheaper than unsubsidized Cobra, said Schwartz. The average monthly premium for an individually purchased policy was $217.75 for one person and $483.25 for a family in 2007, according to America’s Health Insurance Plans in Washington, which represents the health-care industry.
Individual plans, as opposed to an employer-sponsored group plan, are the “fastest growing sector of the business,” said Humana Inc. spokesman Mitch Lubitz. The number of customers has grown 17 percent in the past year to 345,000 in June 2009 from 295,000 in June 2008, he said.
Humana, based in Louisville, Ky., began offering short-term insurance in April for unemployed or part-time workers. Applicants can choose from many features found in group health plans, Lubitz said, and may opt for a policy length from 30 days up to six months or one year. Humana added individual dental and vision options in May as many Cobra users were continuing to pay for dental coverage, Humana’s Large Group Actuarial Director Beth Grice said.
Golden Rule Insurance Co., a subsidiary of UnitedHealth Group, started offering dental and vision plans in the past 12 months, said Ellen Laden of the Indianapolis-based company. The company also added two temporary plans in June, “for consumers whose lives are in a time of transition,” Laden said.
A family of four, with parents in their mid-30s and two children under 10, would pay $133 to $163 in monthly premiums for six-month coverage with a $1,000 deductible, she said.
Consumers can compare rates on hsacenter.com, healthplanone.com or ehealthinsurane.com, Laden said. More information about Cobra is at dol.gov/cobra.