Economic Stimulus Package Increases Affordability, Accessibility of Health Insurance Under COBRA

by Lesley Politi on February 24, 2009

    Economic Stimulus Package Increases Affordability, Accessibility of Health Insurance Under COBRA

      A provision in the recently enacted economic stimulus package that would provide federal subsidies to help cover the cost of health insurance premiums under COBRA will make the program more affordable and accessible, the Wall Street Journal reports. Under the provision, workers involuntarily terminated between Sept. 1, 2008, and Dec. 31, 2009, and whose annual incomes do not exceed $125,000 for individuals or $250,000 for families qualify for subsidies to cover 65% of the cost of health insurance premiums under COBRA for as long as nine months. According to the Journal, the subsidies “should make it easier for people to protect themselves not only from ruinous medical bills, but also from the inability to get new insurance due to a pre-existing medical condition.”

The stimulus package also includes a provision that allows recently unemployed workers who participate in COBRA to switch to less-expensive health plans, provided that their former employers offer them, before the open enrollment period begins. The provision could “help some people who chose the more-expensive health care plans offered by their employers when they had their jobs,” the Journal reports.

However, some employers raised concerns that the provisions will increase administrative and other costs. John Goodman, president of the National Center for Policy Analysis, said, “The new law will impose very large costs on employers” and “make it more expensive for employers to provide health insurance.” He added, “And for those who do, it will make it more expensive to hire new workers” (McQueen, Wall Street Journal, 2/19).

Stimulus Package Unlikely To Prevent State Spending Reductions
The $150 billion included in the economic stimulus package for states over the next two-and-a-half years likely will not prevent tax increases or spending reductions for health care and other programs, as states likely will continue to face large budget deficits after they use the funds, according to a report released on Thursday by the Nelson A. Rockefeller Institute of Government, the New York Times reports.

According to the Times, at least 46 states face budget deficits, and many “governors are being pressured to put off unpopular spending cuts or tax increases by interest groups who cite the large sums of federal aid that are on the way.” In New York, for example, advocates have asked Gov. David Paterson (D) to use funds from the stimulus package to prevent proposed spending reductions for health care programs.

However, according to the report, states “should use the breathing room provided by the stimulus package to mute and spread out spending cuts and/or tax increase they will need to make, to restructure programs and to allow for orderly decision making” (Cooper, New York Times, 2/19).

Opinion Piece
“The best thing that can be said for” the economic stimulus package “is that it will help state and local governments avert financial disaster,” Washington Post columnist David Ignatius writes. The effects of the current economic downturn on state and local governments are “severe and immediate,” as states, which face large budget deficits, likely will have to “raise taxes or cut spending — both of which could make the downturn even worse,” Ignatius writes. According to Ignatius, at least 28 states have considered spending reductions for health care programs, and 22 have considered reductions in services for elderly or disabled residents (Ignatius, Washington Post, 2/19).


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