The government is expanding a massive safety net to help the unemployed buy health insurance, but millions of people can't access the aid because of the way the program was designed.
As a cornerstone of the economic stimulus plan, the administration of President Barack Obama allocated $25 billion to pay 65% of health insurance premiums for workers laid off this year. Earlier this month, Congress extended the program for people laid off through February 2010 and expanded the aid to 15 months from nine.
But the program is eluding many people in need. That is because it is tied to the narrow parameters of COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1985, which President Ronald Reagan signed into law to help people cope during layoffs.
COBRA requires companies with more than 20 employees that already offer group health insurance to continue the insurance for former employees for up to 18 months. But:
It's still too expensive. Insurance costs under COBRA have gotten so expensive that many people can't afford even their unsubsidized 35% portion.
Many don't qualify. Millions of workers don't qualify for COBRA in the first place, because the law doesn't cover the self-employed, those working for companies that abruptly shut down or are too small, or those who worked for companies that didn't offer health insurance to begin with.
Only the newly jobless benefit. The subsidy also is off-limits to individuals who have been unemployed the longest; only those laid off since October 2008 are eligible.
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"This is a vast improvement over what was in place before when there were no subsidies at all," says Jason Furman, deputy assistant to Obama for economic policy. "But this is not the president's long-term health reform -- this is a short-term response to a major economic crisis."
An uneven safety net
The COBRA subsidy is part of the nation's uneven unemployment safety net. It amounts to $325 a month on average for an individual and $715 for a family, according to government estimates. (Jobless individuals pay their former employers 35% of the premium, and the employer recoups the rest through a refund in payroll taxes.)Like unemployment checks, retraining and other benefits, which vary wildly depending on factors such as geography, the COBRA subsidy has created a lopsided system of haves and have-nots.
When Taylor, Bean & Whitaker Mortgage in Ocala, Fla., filed for bankruptcy protection in August, about 2,000 former workers couldn't get U.S. help buying health insurance because the company shut down the health plan.
"Why should I be left out of this government safety net just because I worked for a company that closed?" asks Susan Pascuma, a former insurance coordinator at Taylor, Bean & Whitaker who now is without insurance.
Income, $1,200; insurance, $1,000
Her unemployment check was about $1,200 per month. After paying $800 in rent, Pascuma says, she couldn't afford private insurance of $1,000 per month, the lowest rate she says she found.She recently started working for a maker of air compressor parts on New York's Long Island, but won't qualify for the company's insurance plan for six months. She intends to buy coverage privately.
David Dantzler, a Taylor, Bean & Whitaker lawyer, says the lender didn't have access to funds to keep its insurance plan going. He agrees that it "is terribly unfair" that employees don't qualify for U.S. help.
Similar situations abound. Through September, 45,510 businesses filed for bankruptcy in 2009 -- more than in all of 2008 -- according to the nonpartisan American Bankruptcy Institute.
Continued: Scary and degrading
