COBRA subsidy ends? Now what?

The economic stimulus package passed early this year included a subsidy to help laid-off workers pay for COBRA -- a continuation of the health care coverage they used to have through their workplace.

This week, the nine-month subsidy ran out for the first group of unemployed people who qualified. This is bad news. Paying for COBRA without government help will be a challenge -- an impossibility even -- for many folks.

McClatchy reported on a study done about what they’ll face:

Without the subsidy … COBRA family coverage would eat up a whopping 83.4% of the $1,333 average monthly national unemployment insurance benefit, according to a Families USA report issued Tuesday. … In nine states, the full COBRA family premium exceeds the average monthly state unemployment benefit, the study found.

Here’s the deal: With COBRA, many people who quit or lose a job for reasons other than "gross misconduct" can continue the health insurance they had -- for 18 months in most cases -- but they'll have to pick up the full cost of the premiums, plus a 2% administrative fee. Employers generally pay a big chunk of their workers' premiums -- about 80% for individuals and 70% for those with family coverage -- so the cost of COBRA can be shocking.

Another source, the Kaiser Family Foundation (.pdf file), says the average cost of insuring a family is $13,375 this year -- and $4,824 for an individual. Without a federal subsidy, the average COBRA would cost $1,137 a month for a family and $410 for one person. How could unemployed people come up with that kind of money? Get the picture?

Who’s eligible?

The subsidy, which took effect in March, covers 65% of the cost of COBRA and is available for those who were laid off between Sept. 1, 2008, and the end of 2009. Also under the stimulus bill, people can switch to a cheaper plan if one is available through their former employer.

Note: Not every employer is required to provide COBRA. And if you lost your job because your employer went out of business, there is no longer a health plan to participate in so you’re out of luck.

• Video: Surprise dip in unemployment

The subsidy has likely been a big help for many jobless people. The Kaiser Family Foundation says 60% of Americans under 65 get their health insurance through the workplace. It also says, “No official numbers have been released regarding how many people are taking advantage of the subsidies, but one survey of 200 large employers found that monthly COBRA enrollment rates increased from 19% to 38% once the subsidy was in place.”

Congress is talking about an extension of the original nine-month subsidy. Unless Congress acts, the unemployed who lose it and can’t afford the full cost of COBRA premiums are going to have to scramble for insurance they can afford -- or go without. Among the options:

• See if your kids are eligible for the State Children’s Health Insurance Program.
• Medicaid may be an option for some people, but there are strict qualifications, which vary from state to state.
  • Bing: Medicaid eligibility
• Try to buy individual insurance on the private market. This can be very affordable, particularly if you select a high-deductible policy that’s eligible under IRS rules for a health savings account. Caveat, and it’s a big one: If you have health issues -- those pre-existing conditions you’ve heard so much about -- you could be denied coverage or face premiums that are prohibitively high.

There is help for those people, but it's limited. The Kaiser foundation says:

Federal law mandates that in each state there must be a health plan that accepts those who meet the following criteria: previously insured for 18 months and most recently had group coverage, exhausted COBRA, not eligible for a group or public insurance plan, and uninsured for less than 63 days. There are no federal limits on the premiums for this coverage, although some states do set limits.

Finally, 34 states have a high-risk pool for those denied coverage elsewhere, but the premiums can be quite steep.

If you're losing the subsidy, or otherwise struggling with getting health care, let us know how you're coping.

Related reading:

• A survival guide for the uninsured
• Uninsured by choice? Are they nuts?
• Buy your own health plan
• Know your COBRA rights