COBRA Subsidy Ends As 1.2 Million May Lose Health Insurance

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COBRA, the option of continuation of health insurance coverage after the loss of a job, is one of the few options available to some families when regular insurance benefits through an employer are discontinued. However, the option is not affordable at all, and in 2009 an economic stimulus package made it possible for qualifying individuals to receive government assistance for 65% of the premium costs. The COBRA subsidy ran out on May 31, 2010 and unless Congress passes an extension retroactively, 1.2 million people will lose access to their benefits by the end of June.

COBRA, the Consolidated Omnibus Budget Reconciliation Act, gives workers and their families who lose their health insurance benefits the right to choose to continue their current insurance plan. While those workers who are employed only pay a portion of the premium cost (the employer pays part), qualified individuals under COBRA must pay the full amount plus a 2% administrative fee.

This health insurance subsidy was created in February 2009 to aid those selecting COBRA after the loss of a job as part of President Obama’s $787 billion stimulus program. People who were laid off between September 2008 and May 31, 2010 could receive financial help to cover 65% of the premium costs for COBRA for a period of 15 months.

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According to MarketWatch, the loss of the subsidy will affect about 1.2 million people. House Speaker Nancy Pelosi said Tuesday that she plans to revisit the COBRA subsidy. However, she noted, it is a controversial provision that could be difficult to pass.

According to a new study from Families USA, a health-care advocacy group in Washington without the subsidy, family premiums will jump to an average $1,107 (from an average of $387 with the subsidy) a month. The average monthly unemployment income is $1,313. In 11 states, the average cost of COBRA without government financial aid exceeds the average income from jobless benefits.

People who lose their jobs after June 1 may be able to find health insurance coverage on the individual market if they can afford it and they don't have a preexisting condition that disqualifies them, said Edwin Park, co-director for health policy at the Center on Budget and Policy Priorities in Washington.

"COBRA coverage is so expensive, but the alternatives are either going without coverage or having to go to the individual market," Park said. "As long as there's not a gap of 63 days or more in coverage, you're guaranteed access to the individual market so insurers can't deny you. But it may not provide the same comprehensive benefits."

Families facing the loss of their insurance benefits may be able to enroll their children in the state Medicaid plan, which is a rather affordable option. Unfortunately, however, states are cutting back on Medicaid services for financial reasons which may mean reduced benefits. According to the US Labor Department, the national unemployment rate fell to 9.7% in May from 9.9% in April, largely due to the increase in temporary positions for Census workers.

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