COBRA Insurance Extension Badly Needed

Published: Thu 03 Dec 2009

Larry Roth

The Consolidated Omnibus Budget Reconciliation Act, or "COBRA" was passed by Congrees back in 1986 and its primary function is to allow certain former employees and their families to continue their health insurance coverage at group rates if they are involuntarily terminated from their job. The downside to COBRA (and the reason why an only an estimated 9% of those eligible for it take it), is that the former employee will have to pay all of the premium for the coverage themselves, including the (usually substantial) portion their former employer paid for them.

COBRA was originally designed to last for up to 18 months, giving a person time to find other suitable employment and work through any waiting period before new coverage could begin, or to find individual coverage on their own. The importance of this is in maintaining continuous coverage, either for health reasons or because any gaps in health insurance coverage are looked upon unfavorably by insurance companies when you are seeking a new policy.

When the current recession began in 2008, Congress sought to act quickly to help those who were losing their jobs, or had lost their jobs, to keep their health insurance benefits going forward by passing an extension of the COBRA. Those who were suffering in the recession with the burden of a job loss did not, they figured, need the added burden of losing their health insurance as well - especially given that it was a plank in the incoming administration that health insurance coverage would be a priority. Congress enacted a nine-month extension to COBRA for those who were about to lose their benefits that offered 65% subsidy in February to help employers help their former employees continue their insurance coverage. This extension protection expired as of November 30th, 2009.

Representative Joe Sestack (D-Pennsylvania) has introduced an Extended Cobra Continuation Protection act (H.R. 3930) to the House of Representatives which would extend the subsidy for COBRA. This new extension would:

• Give more time: by extending the current extension out from 9 months to 16 months for those who have been affected.
• Extend the subsidy: to cover individuals who are involuntarily terminated between the months of January 1 and June 30th of next year.
• Increase standard COBRA: extending the period of time from 18 months to 24 months for those who have been terminated since the recession begin in 2008.

The plan would give coverage for those who have lost it under the original extension until May of next year at the very least, however, now that the extended coverage has already expired, getting that coverage reinstated poses an additional challenge for any legislation that is considered. In addition, the current large debate in the Congress over healthcare reform has taken an extraordinary amount of the government's time and resources, hardly leaving much room for this needed extension to make it to the floor.

Robert Gibbs, the White House Press Secretary has stated that President Obama is looking into whether or not the subsidy should be extended, but as yet, no decision has been research and tens of thousands who were getting COBRA through the earlier extension now suddenly find themselves without coverage.

If an extension is passed, it will require a further special act of Congress, written into the bill, to force a restoration of coverage for those who have since lost it under the old COBRA extension and this may lead to a serious paperwork and legal snafu if private insurers (and employers) balk at the added expense, paperwork and trouble of reinstating them.