The recent stock market turmoil has brought back memories of the fall of 2008, and the government stimulus package that followed. One of the provisions of the stimulus package was a program to subsidize COBRA premiums for people who lost their jobs in the wake of the recession. The subsidy program was extended to help people who were involuntarily terminated on or before May 31, 2010, and allowed them to receive up to 15 months of COBRA premium assistance. For most people who qualified for the subsidies, the 15 months has already ended. But for the last people who qualified – those who were laid off in the final days of May, 2010 – the 15 months of premium assistance will come to an end next week.
Unfortunately, unemployment numbers are still pretty grim in the US. Back in early 2009 when the COBRA subsidy was getting underway, 15 months of assistance probably seemed like plenty of time for people to get back on their feet and find another job. We now know that was not the case.
The upside to COBRA is that the insured doesn’t have to qualify medically. They continue to have the same coverage they had while they were employed, although they’re responsible for the entire premium. The premium is usually quite steep, although the COBRA subsidies helped to bring them down to a range that people were more able to afford (especially while living on unemployment benefits). Once the subsidies expire, if the person hasn’t found a job that offers group health insurance, most people will find COBRA to be far too expensive to continue (and eligibility for COBRA itself expires after 18 months in most cases). The obvious choice is then individual health insurance, which is much less expensive than COBRA. But there’s a catch. The reason it’s less expensive is that it’s medically underwritten in almost all states. You have to be healthy enough to qualify. Pre-existing conditions can cause the initial rate to be increased, or can result in a decline.
In states that have a high risk pool that doesn’t require an applicant to have gone without health insurance in order to qualify (like the CoverColorado program we have here), applicants who are unable to qualify for a private individual health insurance policy can transition from COBRA to the high risk pool with no lapse in coverage. But the PPACA-created high risk pools (GettingUSCovered here in Colorado) have a requirement that the applicant have been without coverage for six months prior to getting coverage in the risk pool. For people in states where the only high risk pool option is the one created by the PPACA (that previously had no guaranteed issue option at all), that means they have to go without health insurance for half a year before they can qualify for coverage.
All policies will be guaranteed issue in 2014 (assuming that the PPACA survives in the courts). But that’s still quite a bit down the road, and unfortunately for people who are losing their COBRA subsidy and unable to qualify for individual health insurance, there are still cracks to fall into that can leave them without any health insurance at all.