Failure to Extend COBRA Subsidies Could Hurt Many Families, Report Says

When Congress returns from its Memorial Day recess this week, it will be looking at a jobs bill (HR 4213)—passed by the House and still pending in the Senate—that no longer extends subsidies to assist unemployed workers in paying for their healthcare through COBRA.

Initially, the jobs bill included an extension through November of this year in which unemployed workers (laid off between September 2008 and May 31 of this year) would be responsible for 35% of their COBRA payments, while the federal government would pick up the remaining 65% of the tab. As the House sought to keep costs down in the jobs bill, that provision was dropped.

As of June 1, this subsidy—initially granted under the economic stimulus legislation in 2009—is now expired, meaning unemployed workers would have to pay 100% of their COBRA costs.

Without this subsidy, many families will not be able to afford COBRA coverage, according to a new study from Families USA. With assistance from the federal government, the average family premiums for COBRA coverage had averaged $387 per month nationally. However, without this subsidy, those costs will jump to an average of $1,107 a month for unemployed families.

Without the subsidy, unemployed workers nationwide will have to spend, on average, 84.3% of their monthly unemployment insurance checks on COBRA premiums to maintain coverage, the report estimated. The average monthly cost of family COBRA coverage without a subsidy exceeds the average monthly unemployment income in 11 states: Alabama, Alaska, Arizona, Delaware, Florida, Louisiana, Mississippi, New Hampshire, South Carolina, Tennessee, and West Virginia, the report noted.

The elimination of COBRA subsidies means unemployed people will lose their healthcare coverage, said Ron Pollack, executive director of Families USA, in a statement. "Such a loss of health coverage flies in the face of the recently enacted health reform legislation that is intended to expand health coverage to tens of millions of people."

In addition, the current jobs bill approved by the House also dropped an extension of the Medicaid assistance plan—the Federal Medical Assistance Percentage (FMAP)—that was designed to help financially strapped states under the economic stimulus package pay for additional Medicaid coverage.

FMAP runs through Dec. 31 of this year, but the states had requested an extension through June 2011 to coincide with their state budget planning. Failure of Congress to approve both COBRA and FMAP extensions "will fly in the face of the recently adopted health reform law, which is intended to expand health coverage substantially, starting in 2014," the report said. This failure could create the opposite effect—"causing more and more people to join the ranks of the uninsured and underinsured."