problems with COBRA subsidy law

Kim Morris | March 5, 2009

As with almost any new law, the public comment following the enactment of the COBRA subsidy is almost entirely critical. Perhaps this is a good example of the silent majority vs. the squeaky wheel, but the Internet is loaded with discussion of problems for the COBRA subsidy. The obvious problems are already well-stated at sites like COBRAplan.com.

One of the not-so-analyzed issues is government enforcement of the new law. While the Department of Labor promises quick action on non-compliance problems with employers, the insurance companies are allowed to take reasonable time to verify that other coverage is not available before offering the COBRA. The net effect is the same - benefits are delayed.

The second practical problem is that by the time the offer of COBRA is made to an eligible person the initial cash outlay - which includes retroactive premiums back to the date of eligibility - could easily be more than a thousand dollars. The fact is that most Americans recently laid off (or going through other life transitions that trigger COBRA eligibility) simply do not have an extra thousand dollars to spend on anything! They won't even get to first base with COBRA.

What's the bottom line? The built-in delays in enacting the COBRA subsidy means that the law will benefit a relative few in the upper middle class. Those few who benefit will surely appreciate the new law but the overall effect of the COBRA subsidy in the big picture of health care reform will be negligible.

Tags : health insurance, cobra, american recovery

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