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February 27th, 2009

Should COBRA’s Improved Coverage Be Made Permanent?

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The recently enacted Economic Recovery and Reinvestment Act has endured its far share of criticism, yet opponents have argued little about the benefits the legislation has brought to millions of unemployed Americans.

There are few options for the unemployed when it comes to maintaining health-insurance policies after they have been let go. Laid-off workers have two basic options: research and sign up for a personal policy under an independent insurer, or continue the benefits they were once eligible for under their former employer through COBRA.

The stimulus package provides workers — those who have been laid off between September 1, 2008 and December 31, 2009 — with a federal subsidy of 65% of their COBRA premium for nine months. Employees who were laid off have up to 60 days to sign up for the continued insurance.

While the president’s new law greatly improves COBRA’s coverage, it’s important to remember that the improved benefits only last nine months. It also raises some important questions regarding the lack of cost-effective health-insurance options that most Americans have during unemployment.

Assuming no additional subsidies will be applied to COBRA coverage beginning next year, COBRA will return to the expensive, and ineffective option it originally was considered prior to the stimulus bill.

Considering the Obama administration’s pledge to reform the health care system (to the tune of $634 billion), and considering the common alternative to COBRA benefits are no benefits at all, perhaps the extended coverage should be made permanent.

What do you think?

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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