Expired COBRA Subsidy Led to Higher Premiums, Health Coverage Lapses
Many U.S. residents are facing higher insurance bills after the COBRA premium subsidy expired and Congress failed to reinstate it, Kaiser Health News/USA Today reports.
Background on Subsidy
Under federal COBRA law, employers with 20 or more employees must extend insurance coverage to former workers for 18 months if the former employees shoulder the entire premium plus a 2% administrative fee.
In 2009, Congress approved a 65% COBRA premium subsidy, which cut the average price for family coverage to $385, but the subsidy expired on May 31.
Effects of Subsidy Loss
Although U.S. residents who began COBRA before May 31 are still eligible for the subsidy, those who have exhausted the 15-month subsidy and the newly unemployed are ineligible.
As a result, hundreds of thousands of U.S. residents are weighing whether to continue COBRA without subsidies, seek individual insurance or drop coverage altogether, KHN/USA Today reports.
To address the issue, Sens. Sherrod Brown (D-Ohio) andÂ Robert Casey (D-Pa.) have introduced legislation (S 3548, S 3393) to reinstate the COBRA subsidy that would be offset by eliminating an annuity trust tax break.
The retroactive bill would allow individuals who have become unemployed since June 1 to be eligible for the subsidy for six months.
The extension is estimated to cost up to $4 billion and assist 150,000 families each month, according to the National Employment Law Project.
However, Ron Pollack, executive director of Families USA, said "prospects for extending the subsidy are rather slim," as Congress presently is on recess and the current session is ending soon.
Experts Consider Effects of Subsidy
Some experts have contended that the COBRA subsidy was helpful to just a small number of individuals, as most unemployed workers did not work for large companies that provided benefits before losing their job.
However, several recent studies have shown that the subsidy prompted more eligible individuals to enroll in COBRA.
For example, a Hewitt Associates analysis found that 19% of eligible individuals enrolled in the program before Congress approved the subsidy, while 39% of eligible individuals enrolled after the subsidy was instated (Villegas/Galewitz, Kaiser Health News/USA Today, 8/18).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.