High premiums await those with expiring COBRA benefits

A federal stimulus program to subsidize health premiums stops accepting new people at the end of the year, and some who are already in the program will exhaust their 9 months of assistance soon.

An extension for the program, which covers workers involuntarily terminated between Sept. 1, 2008 and Dec. 31, 2009, could be coming, but the program appears less popular than expected.

Known as COBRA, the federal law makes it possible for laid off workers to stay in their former employer's health plan for up to 18 months. However, they have to shoulder the entire cost alone, plus administrative fees.

When Lisa Fensterman lost her job as an administrative assistant in December, she was able to keep her health plan, but her COBRA premium chewed up $490 a month. Fensterman said she was thrilled when the government announced it would cover about two thirds of COBRA premiums as part of the stimulus package.

"That reduced my payment to $171.84," Fensterman said. "That was a nice huge difference."

Minnesota offers additional help with COBRA, based on income, but Fensterman only qualified for the federal subsidy and hers runs out this month. She's worried about how she'll pay the higher premium once it kicks back in.

She's managed to get some temp work, but it only pulls in 60 percent of her old salary. Like many workers who rely on COBRA, Fensterman said she needs her coverage due to a preexisting health condition. On top of that, she's now being treated for a more recent malady -- anxiety.

"I think the anxiety is tied to the uncertainty of not being employed in such a tough time economically," she said. "Health care plays a big part in that just because of the costs involved.

The White House has supported extending the COBRA subsidy, but lately, Congress has been busier with more sweeping health coverage reforms.

Some experts say a health care overhaul is unlikely to help laid off workers like Lisa Fensterman for a few years. So in the meantime, experts on both sides of the political aisle want to keep the Cobra subsidy going.

"It really provides a valuable safety net for people who lose their jobs," said Kathleen Stoll, director of health policy for the consumer advocacy group Families U.S.A. She said many families cannot afford the average unsubsidized COBRA cost of roughly $13,000 a year, and other plans may not offer anywhere near the same benefits.

"If you were to spend the same amount of money, for a plan in the private individual market, and you have any kind of preexisting condition, you're going to find that you'll get much less coverage for the same price, and you may not get coverage at all," Stoll said.

It's not clear how much an extension of the COBRA subsidy would cost taxpayers. Congress allocated $24 billion to cover the original plan, but participation in the program is lower than expected.

"There was certainly a sense that the engagement wasn't as high as it might be," said Ken Kunsman, vice president with Ceridian Benefit Services, the largest COBRA administrator. The company is part of Ceridian Corporation, based in Minneapolis.

Ceridian's study of 50,000 employers found COBRA enrollment increased from 12 percent of the eligible people to 18 percent once the federal subsidy kicked in. That increase was a lot less than Ceridian expected, and Kunsman said the increases were generally confined to higher income areas.

"In plain terms, if you couldn't afford COBRA, you didn't get COBRA," Kunsman said.

Kunsman said the study suggests that COBRA is just too expensive for a lot of people, even if they're only paying 35 percent of their premiums.

A second study of 200 large employers reached a similar conclusion. Both studies showed that far fewer than half of the eligible laid-off workers took advantage of COBRA, despite the generous federal subsidy.

As for Lisa Fensterman, she's trying to figure out how she'll pay her COBRA premium once the government assistance runs out.

She's hoping she'll land another job with benefits and is willing to accept a 30 percent pay cut to get health insurance, but she doesn't know if she needs to give up that much.

"That's something that's been a hard decision, as I look at positions and postings of jobs, to figure out if it's the time now to do that or if I should just keep holding out hope that something exists in my old pay range," she said.

Until then, Fensterman's taking other cost-cutting measures, which, she laments, detract from her health; among them, she's cancelled her YMCA membership.