Loss of COBRA subsidies pinches jobless

Larry Peterson received a rude awakening when his latest monthly COBRA insurance premium jumped from about $360 to nearly $1,100.

"My first 102 percent premium payment is due Dec. 31," the Chandler resident said. "That's just to cover two people rather than three because my son has other benefits as a Native American Indian. I had to reduce it from three people to two, and, of course, dropped dental and a couple of other pieces just to maintain the bare minimum."

Peterson, who lost is job in the pharmaceutical industry in January, is among millions of laid-off workers and dependents nationwide who received federal subsidies to help pay for COBRA health insurance coverage and lost the benefit on Tuesday. COBRA provides workers who are either laid off or switch jobs the right to temporarily continue their health coverage at group rates.

According to a new report by Families USA, many of those people losing the subsidies may be joining the ranks of the uninsured. The federal COBRA subsidies were started last March by the American Recovery and Reinvestment Act. Under the legislation, the subsidies pay 65 percent of the cost of COBRA premiums for nine months.

Bruce Green, a Chandler resident who lost his job in the semiconductor industry in mid-June, was at the Goodwill Career Center Tuesday applying for the federal subsidy because his former employer is no longer paying for his COBRA coverage.

"I'm still unemployed and all of my separation pay is running out, and the federal program to reduce the cost of that COBRA amount is really looking good to me," he said. "If I can pay 35 percent of a $240 (monthly premium) for the next six months or so, I would very much like to do that."

Nationally, the federal subsidies for COBRA coverage average $722 per month. Without subsidies, premiums for family health coverage will cost laid-off workers an average of $1,111 per month, 83.4 percent of the average monthly unemployment insurance check ($1,333), according to Families USA.

Arizona is among nine states in which the average family COBRA premium without the subsidy, $1,111, exceeds the average monthly unemployment insurance benefit, $941. The average monthly COBRA premium with the subsidy is $389."Without the subsidies, you have to pay 100 percent plus a 2 percent administration charge, and as a result the cost for somebody who is without a job ... this is simply unaffordable," said Ron Pollack, Families USA executive director. "People who started receiving COBRA subsidies in March received the last of those subsidies in November, and starting Dec. 1, those people ... no longer are eligible for those subsidies."

Those people who began receiving the subsidies after March will be losing them in the coming months, he said.

"When the American Recovery and Reinvestment Act was adopted, the Congressional Budget Office and the Joint Tax Committee estimated that approximately 7 million adults and dependent children would receive the COBRA subsidy in 2009. We believe that this will affect several million people right away and will continue to affect additional people as the months go by," Pollack said. "It means that anybody who wants to retain COBRA coverage is going to have to pay for it completely out of pocket. That's roughly over $13,000 in annual premium costs."

Health care reform legislation would provide continued insurance coverage for displaced workers at a lower out-of-pocket cost, but it wouldn't take effect until years from now, he said. In the meantime, legislation is pending in both the U.S. House and Senate to immediately extend the federal COBRA subsidies another six months, he said.

"After Dec. 31, anybody who loses their jobs (Jan. 1 and after), they're out in the cold because the subsidy program will come to an end," Pollack said. "Undoubtedly, the overwhelming majority of them will become uninsured because you simply can't pay something like 83 percent of your unemployment insurance check for the COBRA and still have a meaningful income available for shelter, food, clothing and all the other necessities."

Peterson said he plans to seek cheaper insurance coverage for his daughter, and then he would be the only family member on COBRA.

"Obviously maintaining the coverage is paramount and whatever I have to do, I'll do it," he said.

The Maricopa Workforce Connections career center in Gilbert works with many displaced workers to help them budget whatever income is available to cover expenses like health insurance, said Joanna Abbott, program supervisor.

"(Losing the subsidies) could make a very drastic difference for folks who haven't had to cover the whole amount of their COBRA costs in the past," she said. "That would lead them to other options, and possibly not being able to access health care insurance. As the subsidy loss starts to hit more and more people, I imagine it will be a greater issue."