NAHU does not support extending the duration of COBRA benefits beyond the statutory 18 or 36 months.  In our view, any subsidies for COBRA premiums should be temporary in nature. Individuals who elect COBRA typically anticipate a need for their health benefits and employer plans report that COBRA participants actually cost the employer as much as 150% more than the average plan participant due to adverse selection.  We need to help individuals in these worst of times, but we also must limit the financial impact of COBRA participants on extremely hard-pressed employers and employer-sponsored health plans.

NAHU supports temporary federal premium subsidies to help those suffering a job loss to maintain access to employer-sponsored health insurance coverage under COBRA. These subsidies could be administered simply and efficiently through the employer. The employer, or their administrative designate, could collect the net premium (minus the amount of eligible subsidy) from the eligible individual. The employer or designate would then remit the full premium to the insurer. Then the employer or designate could subtract the amount of the subsidies it had advanced from its federal wage and tax deposit for active employees and submit any required federal subsidy documentation. Wage and deposits are made at least monthly, so this would be a more practical, efficient and timely process for the employer than having a government-issued subsidy check issued to COBRA employees.

In addition, Congress should consider amending COBRA to allow former employees to choose a less expensive coverage option offered through their employer within a reasonable amount of time. Under current law, employees have to stay with the plan they selected until the next open enrollment, which is usually held on an annual basis. With broader options available, employees would have an opportunity to choose a plan that has lower premiums and may be more affordable to them during these rough economic times.

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Yes, make COBRA easier to get and easier to use. People are losing their jobs and losing their coverage, so there's no time to waste. With unemployment at a 16-year high, expect the ranks of the uninsured to swell, putting more strain on state programs that help those in need. COBRA – if made to work – can literally be a lifeline.

Part of the problem with COBRA is that many workers don't qualify as it is – if their employers don't offer coverage in the first place or if their employers go out of business.

What's more, COBRA is unaffordable even to those who are eligible, as the Families USA report makes clear. People who are unemployed are often barely able to pay their mortgages, much less the full cost of a health care premium. Even 20% of the premium would be a financial strain on most unemployed workers, given that the cost of an individual premium is more than $4,000 and family coverage exceeds $12,000.

The solution:

– Allow workers who don't have access to COBRA the opportunity to enroll in Medicaid with a small premium contribution – no more than 5% of their income.

– Provide COBRA-eligible workers with a subsidy or tax credit that covers 80% of the premium.

– Expand the time period for COBRA eligibility – currently 18 months in most cases – to 36 months, given the severe economic downturn. Older workers in particular may have the hardest time finding another job.

Rising unemployment is making our health care crisis even worse, highlighting the need for comprehensive reform. We can't get the economy back on track without fixing health care, and workers can't get back to work if they're sick or have lost their homes due to medical debt. Let's fix COBRA now, so the downturn doesn't push more families into financial ruin.

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COBRA coverage is, by law, 102 percent of the full cost of that employer’s group plan. Largely due to that very high cost, only roughly 20 percent of COBRA-eligible people actually exercise their COBRA rights. And most of them have calculated that despite the high premium, they would take more dollars out of the pool than they would put in. Obviously this is an unsustainable model.

A better solution would be to make people more aware of options in the individual market. According to ehealthinsurance, the largest online broker of individual policies, the national average annual cost of non-group plans is $1,900 for a single person and $4,400 for a family. Those figures are less than half the cost of employer-sponsored group plans.

COBRA works well for its intended purpose, i.e., to assist workers make the transition to another job or possibly Medicare. It never was intended to be on option to assist the long-term unemployed. It could be possible, however, to modify COBRA during this economic downturn to make it viable. This would require a temporary federal subsidy in the form of a targeted, advance able, refundable tax credit that would help many individuals maintain their current form of coverage until the economy recovers. The amount can be debated, but should be a significant percentage of the overall cost to acknowledge that not only has the individual lost the employer’s share, but the individual’s income has been substantially reduced.

It is important to recognize that COBRA has several advantages over other alternatives such as expanding Medicaid primarily because it is a continuation of the same policy and the same doctors that the individual previously enjoyed. This is important from a continuity of care perspective, and since it is a private sector insurance package, reimbursement rates are relatively high, which can avoid access issues. Also, COBRA does not suffer from stigma issues the way that Medicaid does for many working Americans, nor does it require assets tests like in Medicaid.

Certainly subsidizing COBRA is neither a universal nor a permanent solution to the current health care problem, but with a few tweaks, it can be a common-sense part of the temporary solution, perhaps in combination with additional funding for community health centers or other programs.

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There are some serious problems associated with expanding and subsidizing COBRA coverage, and we should consider them carefully before including such provisions in a stimulus package.

Studies have found that on average, COBRA enrollees cost employers about 145% as much as other covered lives - this is hardly offset by the 2% administrative fee enrollees pay. Some companies have reported that COBRA enrollees cost them more than twice as much as others.

Part of the reason for this is adverse selection - if you leave your job, chances are you can probably find cheaper coverage than paying 102% of your former employer's premiums... unless you are already sick. If you know you are going to have big claims, or that you're not going to be able to obtain coverage in the individual market, you elect COBRA. This is okay on a small scale, but if we greatly expand the length of COBRA and subsidize it, thus encouraging people to use it, this could be problematic for employers' risk pools.

By encouraging more people to take COBRA, especially with a long extension like 36 months, and not cutting it off when enrollees are eligible for new employer-sponsored plans, this could increase costs for employers. And why are people electing COBRA? Because they are being let go, as employers try to deal with the economic downturn... So is it truly "stimulative" - and in the best interests of getting the economy moving again - to increase costs for employers, forcing them to lay more people off?

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As the economic crisis continues and job losses mount, extending the
length of COBRA eligibility for American families is an important
component of a more comprehensive strategy to restore the health and
economic security of the nation. Data from the Commonwealth Fund's 2007
Biennial Health Insurance Survey shows that a large majority of
non-elderly working adults would be eligible to purchase their job-based
coverage through COBRA if they became unemployed. Extending this
protection from 18 to 24 months would provide some relief to workers
continuing to look for employment in the harshest economic downturn
since the Great Depression.

However, simply increasing the length of time a laid-off worker is
eligible to purchase coverage through COBRA will not be sufficient to
make coverage affordable to the unemployed and their families if enacted
in isolation. Analysis of the 2006 MEPS dataset shows that a relatively
small number of unemployed adults bought health insurance under COBRA, a
phenomena no doubt attributable to prohibitive premium costs. To
increase participation, the federal government should provide premium
assistance to offset some of the cost for unemployed workers. A 2002
Commonwealth Fund Workplace Health Insurance survey found that as many
as two-thirds of recently laid-off workers would benefit.

Finally, it is important to note that extending COBRA eligibility and
introducing premium assistance will still fail to reach a majority of
low-wage workers, a group that may be the most likely to lose jobs in an
economic downtown. Protecting vulnerable individuals and families
ill-equipped to buy private insurance requires opening up coverage under
Medicaid to low-income unemployed families and reauthorizing the State
Children's Health Insurance Program (SCHIP). Such policies are vital as
millions of Americans struggle to secure adequate health insurance
coverage during a recession.

Now is the time to act. Ensuring that all of our citizens have coverage
by extending COBRA eligibility, introducing premium assistance, and
opening up public programs to the unemployed is a crucial step down the
nation's path to economic recovery and security.

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All COBRA really does is to provide someone unfortunate enough to have lost his or her job to purchase health insurance coverage at the community-rated premium for the risk pool made up by the previous employer’s workforce. Depending on the number of employees in that risk pool and their risk profile, that community-rated premium may be higher or lower, but will generally be a major hit on the households already stressed budget.

            That the U.S. Congress, which represents the American people, would consider this arrangement as a solution to the financial distress suffered by someone unemployed is in itself a powerful statement on the social ethics of Americans. I find it cruel. And even this solution has a duration of only 18 months.

            A better solution would be to force all employees to pay a premium into a new cousin of the unemployment insurance fund, which would then buy the unemployed into a reasonably good insurance scheme – perhaps a public plan of the sort proposed by President-Elect Obama and supported by Senator Baucus in his White Paper on health reform.

Because this is America, one could preserve the individual’s freedom to be improvident by allowing employees to opt out of this Social Insurance scheme, but then they would literally be left to their own misery when unemployed.

            To be sure, such a scheme would quickly be decried as yet another tax hike, because the forced contribution to this new social insurance fund would be in the nature of a payroll tax. But over the past half century, Americans have amply demonstrated their improvidence and myopia with regard to life-cycle planning. With that demonstration behind us, surely the time has come for what in the U.K. is called “paternalistic libertarianism,” that is, public policies that treat citizens like myopic children, but allow them to be naughty and then eat fully the consequences of that naughtiness.

            My prediction is that, in the years ahead, paternalistic libertarianism will become the foundation of a New Deal of the 21st century. Even conservatives will embrace it, as the country will choke in the decades ahead on financing the fruits of 50 years of national improvidence.

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The new unemployment numbers issued on January 9 show that more and more people are receiving pink slips, and a report released on the same day by Families USA makes clear why those pink slips are being accompanied with a loss of health insurance. The report compares average Unemployment Insurance (UI) benefits with average COBRA premiums.

On average nationally, monthly UI benefits are $1,278 while average COBRA monthly premiums for family coverage are $1,069 -- or 83.6 percent of UI checks. For individual coverage, the average COBRA monthly premiums are $388 -- or 30.4 percent of UI checks. These numbers are significantly different from one state to another, so it's important to dig a bit deeper.

In 17 states plus the District of Columbia, COBRA premiums for single coverage consume, on average, more than one-third of UI checks. In 41 states plus the District of Columbia, COBRA family coverage premiums, on average, consume more than three-fourths of average UI benefits. In nine of those states, the average COBRA premium equals or exceeds the average UI benefits. In Arizona, for example, average monthly UI benefits are $937 compared to average family COBRA premiums of $1,084 -- 116 percent of UI income.

Clearly, COBRA is great in theory and lousy in reality. This needs to be fixed.

Thankfully, the incoming Obama Administration and leaders in the Senate and House are considering immediate help for the recently unemployed as part of the economic recovery package that is the top priority for legislative action. That help may come in one or a combination of two forms. First, the recovery package may provide subsidies to make COBRA premiums more affordable; clearly, those subsidies need to be substantial if they are to achieve their purpose. Second, the recovery package may enable laid-off workers to gain temporary enrollment in the Medicaid program with the federal government picking up the full tab.

As important as these measures are, they are only short-term, partial fixes. The growing crisis makes abundantly clear why meaningful health care reform should be an early, top priority. As President-Elect Obama has correctly indicated, we can't fix America's economy without fixing health care -- and the latest problems so evident from the new unemployment numbers underscore this point once again.

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