By Gail Shearer
Consumers Union
Hundreds of thousands of people have lost their jobs since the September 11 attacks. Most of them are facing a double challenge. They have to deal with no health coverage on top of no paychecks. If Congress is serious about boosting our economy, now is the time to devote a substantial portion of the economic stimulus package to cover the health premiums for displaced Americans.
In 1985 Congress passed a law called the Consolidated Omnibus Budget Reconciliation Act (COBRA). The law says if you get laid off, you can continue to receive your group health insurance coverage. But there’s a big catch. You have to pay both the employer’s and the employee’s share of the premiums, plus an administrative fee. The annual bill averages $2700 for one person and $7200 for a family. The situation is even worse for people at companies with less than 20 workers, who have no right to this coverage at all. Neither do people whose employers are going out of business or never offered health insurance in the first place. COBRA health coverage is simply not an option for most people struggling with pink slips.
The consequences of not having health insurance are severe. The path to bankruptcy court often begins with medical bills. Uninsured and underinsured people suffer through a patchwork of safety-net systems. Patients must contend with delayed diagnoses that come too late to make a difference. If you go without health coverage for longer than 63 days, your next insurer has the right to reject coverage for preexisting conditions, such as cancer, high blood pressure, and diabetes, for up to 18 months.
To prevent this from happening to thousands of Americans, the federal government should provide a direct subsidy through COBRA to cover the health insurance of a displaced worker for up to 12 months, or until that worker finds a new job, whichever comes first. If the subsidy covers at least 50 to 75 percent of the premiums for workers laid off after September 11, most of them should have enough economic help to hold onto their health insurance. And states should have the options to provide additional Medicaid subsidies and extend coverage to people ineligible for COBRA benefits. For about $25 billion, approximately one quarter of the size of the House stimulus bill, virtually all of the people who have been displaced since the attacks could have the health insurance they need.
The benefits of such a subsidy go beyond the obvious ones for the affected workers and their families. If consumers knew that they would not automatically lose their health coverage if they lost their jobs, consumer confidence would likely rise. Unlike some stimulus proposals that depend on trickle-down economics, these subsidies must be spent, not saved, and the increased consumption of healthcare services would further stimulate the economy. Plus, these subsidies would help employers by lowering health insurance premiums overall, since the plans would attract a broader group of healthier former employees, spreading the costs and risks among a larger pool of healthier people.
The Senate is weighing several proposals to extend healthcare to the displaced, while the House passed a bill that is short on health subsidies and long on corporate tax breaks. In the rush to satisfy the demands of business lobbyists, Congress should not forget the needs of everyday people who suddenly find themselves without jobs or health insurance. Short-term help for these Americans is essential to improving our economy and restoring our nation’s strength.
For more information, see “A Pink Slip Away ….Why Congress Should Subsidize Health Insurance for Laid-Off Workers.”