End of COBRA insurance subsidy could strain incomes

Keeping health insurance after a layoff without government assistance would eat up 72 cents of every dollar of unemployment benefits for average Kansas workers and their families.

And the expiration of such assistance in the federal stimulus act threatens to push millions of laid-off workers nationwide into the ranks of the uninsured.

Those are the conclusions of a new report by Families USA, a Washington-based nonprofit, nonpartisan group that advocates for health consumers.

The report, which will be released today in Washington, expresses concern over the expiration of a health-insurance benefit — funded by federal stimulus dollars — for workers laid off between March and December of this year.

Ordinarily, workers who leave a job can continue to receive coverage from their former employer's insurance plan under a law known as "COBRA" — the Consolidated Omnibus Budget Reconciliation Act.

But COBRA coverage is expensive because the displaced worker has to pay the full premium, including what had been the employer's share of the cost.

Under the federal economic stimulus bill, the government agreed to pick up 65 percent of the cost of COBRA coverage for as much as nine months for workers displaced by the ongoing economic recession.

But eligibility expired Monday for the first workers to get the COBRA assistance, those who joined the program in March.

And, as the law is currently framed, workers laid off after Dec. 31 will not receive any government help with their COBRA costs.

An estimated 7 million laid-off workers nationwide took advantage of the COBRA-assistance offer.

The exact number of Kansans affected is not available. Federal and state labor, insurance and tax officials could not provide a state-by-state breakdown.

Cost to laid-off Kansans

Families USA analyzed how losing the government assistance will affect individual families.

According to its report, the average cost of insuring a family through COBRA is $369 a month with the government subsidy.

Without it, that cost rises to an average of $1,054 a month — a $685 difference.

The average unemployment benefit in Kansas is $1,465, meaning that without the COBRA subsidy, health insurance alone would consume 71.9 percent of an unemployed family's income, Families USA calculated.

Ending the subsidy will mean "putting continued health coverage out of reach for most families," Families USA concluded.

Congress is considering a bill to extend the COBRA subsidy, said Molly Haase, an aide to Sen. Pat Roberts, R-Kan.

Sen. Sherrod Brown, D-Ohio, has introduced Senate Bill 2730 to extend COBRA subsidy eligibility through June 20, 2010.

The bill also would reduce the unemployed worker's co-payment from 35 percent to 25 percent and extend benefit eligibility from nine months to 15 months, Haase said.

The bill is before the Senate Finance Committee, she said.

Losing the government benefit would make it extremely difficult — in many cases impossible — for laid-off Kansans to continue to provide health coverage for their families, said Bob Brewer, Midwest director for the Society of Professional Engineering Employees in Aerospace.

In Kansas, layoffs of SPEEA's workers didn't start until October, so its members will continue to receive benefits for several more months, Brewer said.

However, he added that he expects more layoffs in early 2010 at Boeing and Spirit AeroSystems, and he hopes the COBRA subsidy will be reinstated in time for those workers to continue coverage.

Clinics already burdened

An increase in uninsured Kansans would put more pressure on already heavily burdened low-cost clinics in Wichita.

Dave Sanford, executive director of GraceMed in Wichita, said his clinic is already seeing a rise in patients that is outstripping its ability to get enough providers to serve them.

Even with COBRA subsidies available, many displaced workers are "basically rolling the dice, hoping they don't have a catastrophic problem until they get called back or they get another job," he said.

For now, GraceMed is dealing with the crunch by setting appointment times for people with more urgent health problems and extending the wait to get an appointment for routine care, Sanford said.

The clinic also is trying to find doctors willing to moonlight at the clinic in the evenings and on weekends, he said.

People who find their COBRA expiring can comparison shop to try to find a lower-cost policy, said Bob Hanson of the state Insurance Department.

The department maintains a list of insurers licensed to sell medical coverage in Kansas at www.ksinsurance.org/consumers/majmed.htm.

The department also is warning consumers to be wary of companies marketing health plans that seem unrealistically cheap, Hanson said.

"Many companies writing very limited health policies, or noninsurance discount plans, are finding a market for those desperate for low-cost insurance," Hanson said.

Consumers wanting assistance can contact the Insurance Department at 800-432-2484.