America's Looming Health Care Disaster

And more bad news arrived last week: the number of newly laid-off workers is officially at a 16-year high.

As these workers face the loss of their employer-provided health insurance, about 1 in 5 looks to COBRA (an acronym for the Consolidated Omnibus Budget Reconciliation Act of 1986) for help, according to statistics from Kaiser Permanente. Through COBRA, a laid-off worker can maintain the same insurance coverage he or she had through their previous employer, but at a cost. Specifically, they must pay the portion of their premiums that they had been responsible for, plus the portion that their employers previously paid -- as well as an extra 2 percent of this combined premium.

The increases are a bitter pill to swallow for someone who has just lost a job and likely has less money to spread around. And the small relief provided is only temporary. Those who cannot find another option within 18 months face a new scramble for coverage once this window expires.

"Unfortunately, the COBRA legislation guarantees laid-off workers the right to continue coverage at their own expense, but does not make that coverage affordable," said Dr. David Himmelstein, associate professor of medicine at Harvard Medical School and co-founder of Physicians for a National Health Program.

"Under COBRA, health insurers may charge higher premiums to sick individuals, so anyone with a chronic condition who really needs insurance will face astronomical premiums," he added. "As a result, the vast majority are likely to become uninsured quite quickly."

"The cost for coverage, coupled with no or substantially reduced [income], may force additional steps to secure cash flow, including mortgage leveraging, credit card and family borrowing, to the extent it is even available," said Jay Wolfson, associate vice president of Health Law, Policy and Safety at the University of South Florida. "And then, without new employment -- perhaps even before COBRA expires -- there is no reservoir for cash, and the cascade of additional economic difficulties may create a deadly flood."

Uwe Reinhardt, professor of economics and public affairs at Princeton University, has studied the U.S. health care system for the past two decades. He agreed that if the economic picture gets much worse, many families could be heading for disaster.

"If this recession gets any deeper and lasts several years, many Americans may lose whatever savings they have, should they or their family members get sick," Reinhardt said.

Will Everyone Be Caught in the Collapse?

But the problems may not be limited to the growing ranks of unemployed. Nash said that even if you have a secure job with a good health care plan, there is still reason to worry. The massive uptick in job losses, he said, are setting into motion a domino effect within the health care system.

The first domino falls when those who lose their jobs seek assistance through COBRA. If they can afford it, they will remain under their old policy and still pay premiums. But if they cannot, they will join the ranks of the uninsured.

For every person who becomes uninsured, health insurance companies lose revenue from monthly premiums. The situation worsens 18 months later, when those who opted for COBRA but have not yet been able to find a new employer-based plan, become ineligible for coverage. The insurance companies will take yet another hit.

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