Unemployed and Uninsured: COBRA Subsidy Cut May Leave Many Without Health Care

Democratic senators want subsidy extended; critics say enough spending.

June 11, 2010 — -- Christina Basso's financial future looks bleak. She is due to be laid off from her human resources job at the University of Nevada in Reno at the end of June.

For technical reasons, she doesn't qualify for unemployment benefits. Her husband, a cancer survivor who lost his job last year, is about to run out of his benefits soon.

To top if off, Basso, 33, and her family may soon slide into the country's growing pool of uninsured, now that the government's subsidy for health insurance for the unemployed – COBRA -- has expired. Basso says she's not sure she can afford to keep herself, her 2-year-old daughter and her husband insured, with her monthly premium at a whopping $1,192 a month.

"Horrible," says Basso, when asked how she feels about her situation.

With no income and a monthly mortgage payment of $1,100, Basso says she has no idea how she will make ends meet. Under normal circumstances she could try to to shop for cheaper insurance elsewhere, but her husband's "pre-existing condition" makes him virtually uninsurable with new insurance companies.

"I think it's important for politicians and people in general to realize that the COBRA subsidy is not just a 'bonus' for people but it can actually be the difference between staying 'afloat' until a person can find a new job and living in the street," she says.

The debate over the COBRA subsidy is drawing many strong opinions. It expired on May 31 and the Senate is set to vote next week on whether to reinstate it. It's not clear whether the subsidy will survive.

Senate Democrats are hopeful the measure will at least pass the Senate. Even if it does, however, the amendment must go back to the House for a final vote, where House Democrats had originally quashed it. A coalition of House Democrats known as the 'Blue Dogs' in particular have been opposed to spending that worsens the nation's $13 trillion debt.

COBRA is a program that allows workers to keep their employers' insurance benefits, for up to 18 months, if they pay the entire premium. Under the old rules, COBRA was often considered unaffordable. Although you paid less than the individual premium because you could take advantage of the group rate offered to your employer, you were likely still giving up a hefty chunk of your unemployment check.

So when the recession hit, Congress voted to pay 65 percent of COBRA premiums, bringing the average cost down to earth. The subsidy was extended twice and was originally scheduled to be extended again until December of this year. But House Democrats stripped the extension out of a tax bill they passed last month, out of concern for the growing budget deficit.

Familes USA, a Washington-based consumer advocacy group, says that the loss of COBRA subsidies would make health insurance impossible to afford. The group found that the average monthly COBRA premium for family health insurance is $1,107, or about 84 percent of the average monthly unemployment benefits check. With the subsidy, the average cost of COBRA is $387.

"The elimination of COBRA subsidies means that people losing their jobs will also lose their health coverage," Ron Pollack, Families USA's Executive Director says in the report. "Such a loss of health coverage flies in the face of the recently enacted health reform legislation that is intended to expand health coverage to tens of millions of people."

Senate Vote on COBRA Expected Soon

Earlier this week, Senator Sherrod Brown (D-Ohio) and Senator Bob Casey (D-Pennsylvania) introduced an amendment to extend the subsidy until November 30. They say that record unemployment qualifies as an emergency which calls for emergency spending.

They also argue that cutting unemployment benefits will slow economic recovery by forcing the jobless to cut spending on essential goods.

"COBRA without some kind of assistance is almost a cruel hoax," Brown tells ABC News.com, arguing that many Americans are not able to afford unemployed health insurance without a government subsidy.

Sen. Casey estimates that COBRA premiums would eat up 75 percent of the monthly unemployment payment for a Pennsylvania family.

"We're in the midst of a recovery but there are people still living through this nightmare of the downturn," Casey tells ABC News.com. "The last thing we want to do is pull the ladder out from under them."

On the other hand, Robert Book, a senior research fellow at the Heritage Foundation, says that such spending expands an already dangerously large budget deficit. And he argues that such subsidies encourage people to remain unemployed.

"Just like any other unemployment benefit, it reduces the incentive for people to find new jobs, so people remain unemployed longer than they would otherwise," he says.

Donna Lynch, a former business analyst who was laid off from Aetna last year, doesn't agree. Lynch recently survived breast cancer, and says she's lucky that she qualifies for the subsidy, which puts her premium at $250 for herself and her 9-year-old daughter. Because of her pre-existing condition, Lynch would find it almost impossible to buy insurance from a new provider.

"I'm looking for work every single day," she says. "The subsidy is a huge help. It has enabled us to pay our other bills."