For thousands of laid-off Americans who have been relying on COBRA for their health insurance the past several months, Friday brought some bad news. In an effort to trim the deficit, the House voted to drop an extension of COBRA benefits that would have given displaced workers coverage until the end of the year. That would have cost the government nearly $8 billion. The Senate will vote on the issue next week.
These benefits have been a godsend to many since the federal government has been picking up part of the premium cost'no small matter since people on COBRA are normally expected to pay for the entire cost of their employer-provided coverage plus an administrative fee. With family policies costing employers way over $1000 a month, few newly out-of-work people can swing that.
The stimulus package passed in early 2009 threw a life line to some of the recession's victims. It allowed workers to get 15 months of COBRA benefits (generally they last 18 months) with the government picking up 65 percent of the cost. That enabled people to continue their coverage until they found another job, presumably with health insurance. There have been four extensions. But the unemployment rate hasn't budged much, and laid-off workers still can't find jobs. All of which brings me back to what are these thousands of people to do if the Senate goes along with the House and says no to further extensions?
If you're in this pickle, your first instinct might be to get on the Internet and look for insurance quotes in the so-called individual market. There, prices are sky high even if you can get a policy. Insurance companies are quick to reject customers who have health conditions they don't want to insure like heart disease, diabetes, or glaucoma. That practice will end in 2014 when companies must take everyone, including those who are sick.' But for the moment someone losing COBRA who is sick has few options.
Shopping through the Internet is no picnic. Preparing this post, I did a quick search to see what options those searching for replacement coverage might find.' ' For starters, a site called Cobrainfo, flatly told visitors today that 'Government help for COBRA has expired and is no longer available.'' Note:' there's still a chance the Senate won't go along with the cut made by the House.' So it's not a done deal yet.' The site also said that 'Individual COBRA alternatives aren't as expensive as you think. Plans could be as low as $68 a month.
Well, maybe, but any policy costing $68 a month offers little protection.' So I followed the prompts, filled in some blanks asking for personal information, and finally got to a page that offered details about a plan from Empire Blue Cross.' It was called a 'Best Seller' and cost only $176.78 a month.' It was what we call a hospital indemnity policy which covers just hospital services.' While there was no deductible or coinsurance required, there was no coverage for doctor visits, none for preventive exams or well baby care, and no prescription drug benefits available.' In the insurance business, you get what you pay for.' If you don't pay much, you don't get much.
Another page offered nine other options available in my zip code.' They all had the 'Best Seller' designation and ranged in price from the $178 cheapie Empire plan to an expensive Empire plan costing $1,228 a month.' I was suspicious. Were Empire's customers flocking to both its rock bottom plan and its Cadillac?' Or was the 'Best Buy' label slapped on each offering as a way to entice buyers with a stamp of approval?' Of course, a skeptical shopper would want to know exactly what does best seller mean.
Welcome to the insurance market jungle.' Whether laid-off workers lose their COBRA coverage next week or at the end of the year, they inevitably will have to hack their way through this thicket or go without coverage.' Over the next few months, we'll be giving advice on how to do that.