COST: COBRA Subsidies as Economic Stimulus

As Congress readies the stimulus package, it seems health care will have a prominent role to play. Yesterday, Senate Finance Committee chairman Max Baucus told reporters that the stimulus will contain significant subsidies for COBRA benefits.

COBRA allows laid-off workers to continue their group health care coverage for up to 18 months—provided they pay the full cost of their plan's premium, which for a typical family can be over $12,000 a year. Not surprisingly It's estimated that only 15 percent of those eligible for COBRA actually take up the benefit, and close two-thirds of those surveyed in a recent Kaiser poll said it would be "very difficult" for them to pay for COBRA. (See below)

For example, for an individual earning $30,000, the cost of COBRA would amount close to 80 percent of their income for a year. Subsidizing COBRA, then makes sense not just in terms of continuityof  care, but as a broader counter-cyclical macroeconomic policy freeing up disposable income to help stimulate the economy.

Updated unemployment numbers for 2008 come out Friday. With every 1 percent increase in the unemployment rate associated with additional 1 million losing their health insurance, subsidizing COBRA is both timely and necessary. But is it enough?

A recent report from Accenture that 78 percent of Americans wanted health care coverage that was portable. (Jane Sarasohn-Kahn has more on the report). Yet, all too often in these troubled economic times, losing your job means losing your health coverage. COBRA was meant to aide transitions between jobs and types of coverage. Subsidizing COBRA should be seen as one of many initial steps to smooth the way, along with SCHIP expansion and more federal matching funds for Medicaid, cushioning us from skyrocketing numbers of uninsured during the economic crisis. It's one of many temporary steps we'll need to get us through these rough times as we transition to more permanent health coverage solutions and a more sustainable health system.