It’s Long Past Time to Reform COBRA

[MacBeth]

Today is a rough day for anyone who values work and staying employed. As I write this, five large employers have just announced a total of 45,000 layoffs (20,000 at Caterpillar, 8,000 at Sprint Nextel, another 8,000 at Pfizer, 7,000 at Home Depot and another 2,000 at General Motors).

The recession the new president is battling seems to be getting worse by the day. That’s why it makes a lot of sense for the president’s stimulus package to push for the reform of COBRA insurance for the rapidly growing population of the unemployed.

Anyone who has lost their job and wanted to utilize COBRA to continue health coverage until they find new work knows all too well that the big problem with COBRA is that it’s incredibly expensive. I tried it once, for about a three- month period, and even the most inexpensive catastrophic coverage policy for my family was about 50 percent more than my old employer-subsidized policy. Try paying for something like THAT when you are out of a job.

In other words, although COBRA sounds great in theory, in reality it just costs too much to do much good for the unemployed. A new study by the Commonwealth Fund that was reported in the Dollars & Sense blog in The Kansas City Star bears this out. It found “that only 9 percent of laid-off workers took up coverage under COBRA in 2006.” The article cites the report, “Maintaining Health Insurance During a Recession: Likely COBRA Eligibility,” which found that 60 percent of current workers, if laid off, would be eligible for COBRA. The report notes: “But for most people, COBRA payments are unaffordable–averaging $4,704 a year for individuals and $12,680 for families.”

This is why COBRA expansion is part of economic stimulus package President Obama is trying to push through. Although this proposal doesn’t deal with core problem of the cost of COBRA, it does address a more pressing concern: that people who lose their jobs frequently need to continue health coverage on their own for a lot longer than the 18 months allowed under current law.

The Senate version of the economic stimulus bill does deal with the high cost of COBRA coverage, by having the federal government pay 65 percent of COBRA premiums for employees who lose their jobs between September 1, 2008, and December 31, 2009, according to a story from Business Insurance, a sister publication of Workforce Management. “The subsidy would be available for up to nine months,” the story says.

Every unemployed worker in America gets COBRA sign-up information from HR when they get laid off. But as the Commonwealth Fund report shows, less than one in 10 workers choose to take advantage of this pricey benefit, even though it is being offered at a time when they probably need it most.

You can debate a lot of the proposed spending that’s in the president’s stimulus package, but reforming COBRA and helping unemployed workers keep their health care going seems like a no-brainer to me. We’re long past the time for meaningful COBRA reform. Maybe this economic downturn is finally when we’ll have a benefit that really helps out-of-work Americans, rather than offering something that sounds good in theory but fails to help people in the real world of illness and medical bills.



workforce.com/wpmu/bizmgmt/2009/01/26/long-past-time-to-reform-cobra/

[Calluna]

I'm glad they're looking into this one. Every time I've moved, the previous employer has to give the obligatory spiel about COBRA, and I always end up staring at them cross-wise as I try to figure out how someone who was going to be out of work would be able to afford those premiums, and if they could afford those premiums, why on earth wouldn't they just pay directly for health care rather than waste it on insurance? I think the ONLY time the expense is justified is if you know you have some pre-existing condition that's expensive to treat and a gap in coverage would leave you uncovered for that pre-existing condition at the next job on the next insurance plan.

Even easier, why don't they just make it that employer covered insurance plans can't exclude pre-existing conditions? Then you don't really need COBRA if you're unemployed, just a less expensive major medical plan in case you land yourself in the hospital.

Or, or, or, if you're getting unemployment checks, include medical coverage (medicaid I guess) as part of that. If you're out of work longer than you qualify for unemployment checks, and you don't qualify for disability, THEN there's a problem with your own efforts to find work and it's time to write you off the taxpayer payroll.

I guess, basically, I think it would be cheaper for the government to pay for healthcare, as needed, during someone's unemployment period than it is to pay for insurance premiums.

[wayneinfl]

Every time I've been offered COBRA, it was always cheaper just to figure on Medicaid picking up the bill.

The company that got our contract offered me less money, no company vehicle and the closest health insurance plan (still doesn't cover as much as ours) is $500 a month. Geez. Cheap bastards- they're not making any money, and can't afford to take care of the employees.

Today, I interviewed for a transfer to Phoenix or Seattle. I think I pretty much flubbed that one. Thursday, I'm interviewing for a transfer to Savannah, GA. That might go a little better because I'll know some of the people on the conference call, and I already have an idea what kinds of questions they'll be asking.

I'm thinking about getting out of the telecommunications industry altogether and selling drugs. Drug dealers seem to be universally busy.

[wheelspinner]

WayneinAZ? WayneinGA? WayneinWA?

None of them have seems quite right, although the last one has a nice alliterative quality.

Good luck on the job hunt Wayne.

[oskar]

The company that got our contract offered me less money, no company vehicle and the closest health insurance plan (still doesn't cover as much as ours) is $500 a month. Geez. Cheap bastards- they're not making any money, and can't afford to take care of the employees.

Such is the nature of free-market capitalism, Wayne.

[cooter50]

The last public garage I worked at the insurance was almost criminal, $450 a month for a family yet you had to meet a $2200 a year PER PERSON deductible to get ANY benefit. It was a ripoff, the employer paid nada for any part of it just offered it as a "Benefit".
Two guys got hurt AT work there, both had valid comp claims but the employer challenged both as his rate would go up to cover, felt it was better for them to use the regular insurance, both won but the time it took to get the comp was atrocious. Glad I got out of there.

[wayneinfl]

"Such is the nature of free-market capitalism, Wayne. "

You're right. The incentive is to make money and damn everything else. But this company needs to take its head out of its behind and see that it's actually wasting money by undercutting everyone to perform the same work. And it's probably not providing the level of service AT&T expects from us. If they continue to do business this way, they're unlikely to outlast the recession. Let them hire on guys who are willing to work for 20% to 25% less and no benefits and see what quality they get. After a few service interruptions this company (and AT&T) will figure out that hiring cheap employees and undercutting the rest of the industry doesn't make as much sense as paying a little more for quality.

[oskar]

It's the approach started under Ronnie Ray Gun and touted as the way to do things. After all, look at the booming economy. What they didn't tell anybody was that Ronnie Ray Gun got his trickles mixed up. Rather than a trickle down it's a tidal wave up.

[wayneinfl]

I think the approach I'm talking about started long before Reagan. I don't see what is has to do with "trickle down economics". Big companies have always found penny wise and pound foolish ways of doing business. It will come back to bite them in the butt once they pay out for lost business a few times.