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COBRA Subsidy Expires: Less Affordable Health Insurance for Unemployed

Finding affordable health insurance is one of the primary concerns for people who have recently become unemployed. If your job offered health insurance benefits, the premiums were heavily subsidized by the company. Moreover, the cost of underwriting policies is spread among the entire workforce. This makes employer-sponsored health insurance relatively inexpensive. Since the risk is also distributed evenly among employees, you are virtually guaranteed to recieve health insurance, regardless of any pre-existing conditions you may have.

However, the situation changes when you lose your job; your former employer will no longer pay part of your health insurance premium, so you will be responsible for the entire amount yourself. COBRA, also known as the Consolidated Omnibus Budget Reconciliation Act, lets former employees retain the health insurance coverage from their last job. It won’t necessarily be affordable health insurance, but it’s there nonetheless. Keeping your health insurance policy (whether it is an individual health insurance policy or through COBRA) current is very important, since uninterrupted insurance will help protect you from future coverage exclusions.

Unemployment obviously makes covering the cost of a COBRA health insurance premium difficult. This recession has resulted in millions of Americans becoming out of work and in danger of losing their health insurance. As part of last spring’s stimulus package, President Obama and Congress enacted a 65% subsidy of COBRA health insurance premiums. Qualified ex-employees-those who were let go as a result of a layoff or downsizing between September 2008 and December 2009-were able to take advantage of affordable health insurance made possible by the government’s subsidization. This type of health insurance is still more expensive than insurance provided by an employer, but paying only 35% of the cost of health insurance frees up money for other consumer spending able to stimulate the economy.

Unfortunately, the subsidies only last for nine months. After that, health insurance rates will triple for many people, as they are again forced to shoulder the full cost of a policy. Without an extension of this provision in the American Recovery and Reinvestment Act, affordable health insurance options for the unemployed will decrease. Congress doesn’t seem to have any plans to address the issue in overarching jobs legislation or separate legislation any time soon. Economic recovery is occuring at a slow pace, which means that a significant percentage of the unemployed remain so after that length of time. Health insurance costs eat up a large portion of state unemployment benefits. COBRA enrollment has doubled since the subsidy was enacted, meaning that quite a few people feel an unwelcome shock at the cost of next month’s premiums.

There are multiple steps a person can take if they are worried about the cost of purchasing a health insurance plan. Affordable health insurance is available for both individuals and families on the open market. In many cases, these policies cost less than retaining a unsubsidized COBRA policy (when paying 102% of the premium’s cost). It is important, however, that a person doesn’t drop their COBRA coverage until another health insurance plan has approved him or her. When a person has pre-existing conditions, buying affordable health insurance becomes more difficult. However, most states have high-risk health insurance pools as supplements. There are also Children’s Health Insurance Programs run by each state that kids may qualify for if their family is earning below a certain income level. No matter what, there are solutions to the affordable health insurance crisis available.