Saturday, January 10, 2009

Bitten in the Asp

[Welcome Kaiser Network readers!]
The good thing about COBRA (the Consolidated Omnibus Reconciliation Act of 1986) is that it exists at all.
On the other hand, the bad news about COBRA is that it exists at all.
Briefly, and as it pertains to health insurance, COBRA enables an insured to continue his group insurance coverage even if he's no longer an employee of that company. This is both a boon and a bust: the boon is that unhealthy folks, who might otherwise have trouble finding coverage in the individual market, can keep their coverage for up to a year and a half (and sometimes even longer). If one is in the midst of a claim, this can be a lifesaver (literally).
COBRA also dovetails with HIPAA so that, if one continues to have significant health problems, one may transition to a guaranteed issue individual plan with no exclusion for pre-existing conditions (pre-ex). Again, this can be a major benefit.
There are also (at least) two substantial problems with the law: the first is that, contrary to popular myth, belief and advertising, group coverage is almost always more expensive than individual (for a variety of reasons), but this cost is hidden from the employee because most employers subsidize the coverage. That is, most folks think their health insurance costs, say, $50 a week, but aren't aware that the employer is also chipping in at least that amount [ed: as we've noted before, this isn't exactly accurate, but we'll leave it be for this post]. So, the premium that one pays under group is really only a portion of the total, real cost.
When one elects COBRA continuation, one pays "full freight" for the coverage, which includes the amount the employer had been kicking in. This usually results in "sticker shock:"
Because few people can afford that, the authors say, the result is a growing number of people being hit with the double whammy of no job and no health coverage."
Well, that's part of the story, anyway.
The truth is that very few people are truly uninsurable, but many (most?) folks don't know this, and so they don't even bother to look for alternatives to COBRA. And there are many such: individually underwritten major medical plans, short term medical, even mini-med plans all fill some (often significant) gap, and are usually less expensive than the COBRA offering.
Of course, with unemployment quickly edging back up (after years of being below historic levels), this is becoming more relevant, and urgent. The challenge is that Congress is going to be pressured into offering even more gummint-styled solutions (which, of course, is exactly what gave us COBRA in the first place), when the individual market is far more capable of crafting and providing more realistic alternatives.
And that begets another problem: how to cut through the political rhetoric to get that message out. If industry trade groups, such as NAHU and AHIP, were truly focused on market solutions (which, of course, they are not), then they would be blitzing the airwaves educating the public about these cost-effective alternatives to COBRA.
I'm not holding my breath.
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