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COBRA Subsidies Should Be Extended

The House and the Senate are both considering bills that would extend the recently expired government subsidies for COBRA coverage. The Senate bill would provide subsidies through next June and raise them from 65 percent to 75 percent of premiums that average more than $1,000 per month for family coverage. It's not clear how much political support there is for this legislation, but it deserves to pass.

The original COBRA subsidy law, included in the economic stimulus package, allocated $25 billion to help laid-off workers pay premiums in group plans sponsored or purchased by their former employers. Under normal conditions, the cost of COBRA is so high that only about 9 percent of those eligible opt to remain in their group insurance plans. But, with the government footing two-thirds of the bill, that percentage has doubled. It is estimated that about 3 million Americans are now insured through COBRA plans.

Employers have complained about the administrative burden of maintaining the additional ex-employees in their group plans, and insurance companies are also beefing that COBRA attracts a disproportionate share of consumers in poor health. (If this is true, it would indicate that companies tend to lay off their older and sicker workers first--not surprising, since older employees usually earn more than young ones do.) But there is no doubt that unless Congress acts, many people now on COBRA will have to drop their insurance. In Connecticut, for example, the average cost of COBRA insurance is 83 percent of average monthly unemployment benefits.

What the COBRA imbroglio illustrates is the plight of millions of unemployed Americans who will continue to lose their health insurance as a consequence of losing their jobs. Unfortunately, even if health reform legislation passes, the cavalry will not come to the rescue of these people until 2013 in the House bill and 2014 in the Senate measure. If the economy miraculously revived and generated millions of new jobs, they might be saved. But that's unlikely to happen in the near future. So just as Congress has extended the period of eligibility for unemployment insurance several times, it should also extend the COBRA subsidies.

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