Obama's plan to sell insurance to the unemployed
Step one of the Obama health care reform action turned out to be a mis-step this week as major national media and health care advocacy groups expressed disapproval for the provisions of the stimulus package were revealed. The program proposes to expand Medicaid social insurance to the unemployed and offers to pay 65% of the cost of recently terminated employees who opt for the expensive COBRA continuation coverage from their former employer. Unfortunately, there are no provisions in the Obama bill as proposed to take advantage of the cost-effective proposals for the unemployed laid out clearly by the National Institute for Health Care Management.
Expanding Medicaid to working class Americans is a topic unto itself; we can skip this provision for now. This blog is not a comment on socialized medicine but rather on the basic economics of health insurance.
The fundemantal problem with expanding COBRA is that laid off workers don't want or need COBRA coverage with all its bells and whistles and expensive price tag. They just need something to get them through until benefits start on a new job. Easing their unemployment by providing full medical benefits, is not the way to go. Those familiar with actuarial science (the study of logic, behavior and mathematics behind insurance) point out that the Obama plan will significantly raise the cost of insurance for those already covered by an employer plan.
The best approach to providing coverage to the unemployed has been on the table for many months. (See Covering the Uninsured: 2008 Update"). The most cost effective solution is simply educating exiting employees on their available health insurance options and making it easy to enroll in the plan that makes the most sense. Experience shows that most terminated employees will select an appropriate low cost insurance that provides catastrophic protection when they know that this choice is readily available.
The insurance chosen by most laid off workers is a form of short term medical insurance. This is high limit major medical insurance that covers doctor's visits, hospital charges, outpatient costs and surgeries. It does not cover pre-existing conditions. The policy expires after a period of time. The policy typically expires after six months although some newer policies can be expanded to 36 months. The main advantage of this coverage is that it is affordable - typically 1/3 of the cost of COBRA coverage. For a person who has just lost a paycheck and is not waiting for unemployment benefits, this savings can be a lifesaver. Other advantages are that it is available immediately online, is portable accross all state lines, accepted by all doctors and hospitals and the coverage is easy to understand. While short term coverage is not the best option for every terminated employee, it has worked well for tens of millions of workers over a period of at least the last four decades. It makes no sense to trash economically sound and well-proven health insurance programs that work for the large majority of Americans simply because the programs cannot acommodate a few.
The Obama plan proposes to sell a high priced product to people who have just lost their job by saying "go ahead, we'll kick in most of the cost". This sales approach doesn't work well for selling vacation condos and it won't work for selling health insurance.Tags : health care reform, obama stimulus, unemployed, unemployed health insurance