Stimulus Bill to Cover 65 Percent of COBRA Costs for 9 Months

The economic stimulus bill that the House and Senate are expected to vote on today will do precious little to ensure that people who've lost their jobs can get the healthcare they need. During earlier debate, a number of proposals were floated that were aimed at low-income and older workers. One would have allowed low-income workers who lost their jobs to apply for Medicaid if their jobs didn't offer health insurance. Another would have let laid off workers ages 55 and older keep their employer health coverage under COBRA for longer than the usual 18 months.

Neither of those proposals made it into the final compromise bill, zeroed out amid worries that once a benefit is extended to a particular group it won't ever be pulled back. Former Medicaid recipients in many cash-strapped states can attest that entitlements are not, in fact, forever. So can all the workers who've seen their 401(k) employer match nixed this year. But no matter. It's a predictable objection that gets trotted out regularly.

What did make it into the final stimulus bill is a provision that provides a 65 percent federal subsidy for COBRA premiums for up to nine months for workers who lose their jobs. Workers laid off between Sept. 1, 2008, and Dec. 31, 2009, would be eligible, and those who were laid off since last September who had initially declined COBRA would have 60 days to elect it. The subsidy isn't available to workers whose income in the year they would receive it exceeds $125,000 for individuals and $250,000 for families. The Joint Committee on Taxation estimates that 7 million people would keep their health insurance thanks to this provision.

That seems optimistic. Under COBRA, workers must pay 100 percent of the premium, plus a 2 percent administrative fee. With premiums for a typical family policy costing nearly $13,000 a year, under the new legislation they're still looking at spending close to $400 a month on health insurance premiums. Meanwhile, the average weekly unemployment insurance check is about $300, and even with the extra $25 per week that the stimulus bill tacks on to weekly benefits, people are going to have to think long and hard about whether they can afford to extend their coverage under COBRA.

I wrote earlier about the gap between unemployment insurance benefits and COBRA costs and offered ideas for ways to minimize COBRA's bite. As I explained in that piece, there are no good solutions for healthcare coverage in tough times. Unfortunately, this stimulus bill doesn't provide any either.