beauty and health

Posts Tagged ‘unemployment’

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.

THE Housing Solution

Well the numbers are in and it looks like home foreclosures are up a whopping 15% in the first half of 2009, affecting more than 1.5 million households. This problem does not appear to be getting any better as unemployment is nearing 10% and could go even higher, if you believe like me that government forecasts are about as accurate as throwing darts in the dark.

So the most recent “shot in the dark” from the Obama administration appears to be this disaster: a rental option for those facing foreclosure. This will “help” people stay in their homes and will transfer their equity, if they have any, to the bank and allow them to rent from banks, who apparently are now to become landlords. This is flawed on so many levels I don’t know where to begin.

Perhaps they need to look no further than one of their own agencies, Sallie Mae, for a real solution to what’s becoming the #1 problem with our economy and our country. Let’s have a look.

When I was an 18-year old and about to start college, I knew it would be necessary to take out a loan to pay for some of the costs of attending a private university. What I didn’t know at the time was that I was basically signing my life away, and that this debt would follow me wherever I went through life, the only way to get out of it being either death or permanent disability. And while I had always intended upon paying the money back and since have; had I understood those ramifications at the time I signed on, I may have thought differently about it.

Fast forward to today, the average college student graduates with over ,000 in debt, and they haven’t even entered the workforce yet

So why are we letting homeowners (or those who took out mortgages) walk away from their obligations with not so much as a dent to their credit? Unfortunately, the mentality that got us into this mess is the same mentality that will continue to kick this problem down the road in the name of populism. But I say: it’s time to get tough!

Here’s how to combat this problem in a sensible way without harming those who were responsible citizens (any more than they already have been) and at the same time holding all of the “bad actors” responsible.

If you receive a foreclosure notice, you have 2 options: to either walk away (as is what is currently being done) or opt in to a new program which will be outlined below. Both options will have benefits AND consequences.

If you choose option 1, the consequences are: immediate removal from the property in question. An automatic 400 point hit to your credit and you are BANNED for 10 years from buying another property unless you pay back the loss the bank incurs in full. It becomes a criminal offense to damage a house on the way out with automatic jail time.

If you choose option 2, the new plan will be structured as follows: you are given a timetable by which you need to vacate the premises. The house is auctioned off immediately and whatever the market brings is final. The loss that is incurred is split 3 ways, 1/3 to the bank, 1/3 to borrower, and 1/3 to the government.

However, the loss incurred by the borrower is given an immediate forbearance and it now becomes a Sallie Mae-type loan.

For example: if a homebuyer paid 500K for a home he can no longer afford, the home gets auctioned off immediately. Say it brings in 350K. The 150K loss gets split 3 ways and each party is responsible for 50K.

But now the home-buyer does not have the “scarlet letter credit smear” on their report and can apply for a new mortgage at a time that they are ready to get back in the market. This means no more LIAR or NINJA loans.

So now some time goes by and that original homebuyer is able to get back to work and maybe save up a little cash for a down-payment. He can come back into the market and buy the amount of a house he qualifies for LESS the amount of the money he owes on his first failed attempt. So if he qualifies for a 250K mortgage, he can only buy a home worth 200K.

He pays a tax increase of 2% over the next 20 years to repay the government so that responsible citizens do not have to carry the load in full.

What does this accomplish? First, it allows the homebuyer an escape route AND still be responsible for their role in the mess and not be totally ruined. Secondly, it allows the banks to move the house quickly which will help housing prices bottom out more quickly which will bring in new buyers. It allows responsible homebuyers to upgrade if they choose, while at the same time forcing the less responsible to downgrade. The inevitable loss that a responsible homebuyer faces is off-set by the new lower price of his home, and you give him a tax credit for the loss which they can take over say 5 years.

While this is just one proposal, I really hope the government adds an element of personal responsibility back into any program that they choose to try to combat the housing problem. But trying to artificially prop up home prices and rewarding those who acted badly all on the tax-payers dime is a travesty.

After all, there are 22 year olds walking around with 25K in unforgivable debt and they haven’t even been given the opportunity to act irresponsibly yet.