The Doctor Is In: Stimulus package takes much of the bite out of COBRA

If you've lost your job, or are about to, good news: The cost of your health coverage may have just dropped by two-thirds. The massive price break comes courtesy of President Obama's economic stimulus package and a clause applying to workers who qualify for COBRA (Consolidated Omnibus Budget Reconciliation Act), the 1986 law which allows terminated employees to continue on their previous employer's health plan for 18 months after their departure.

For years, COBRA provided a reliable and relatively inexpensive safety net for workers in between jobs. As long as your workplace employed at least 20 people, you had the option of continuing your health coverage -- provided you picked up 100% (or in some cases 102%) of the cost -- at group rates. The problem is, the cost of monthly health insurance premiums -- for everyone -- has skyrocketed. Last year alone, according to the National Coalition on Health Care, employer health insurance premiums increased 5 percent, or two times the rate of inflation. The annual health insurance premiums for a family of four now average nearly $12,700, and for singles more than $4,700 -- and that takes into account people whose employers are still picking up a portion of the biill. COBRA recipients, in other words, were getting hammered.

But the new stimulus provision allows laid-off workers to pay just 35 percent of the usual cost of their employer's health plan, with the government paying the rest. The only requirements are that you must have lost your job after September 1, 2008, and your household income must be less than $250,000 (or $125,000 for an individual). The subsidy lasts for nine months. And best of all -- the changes are effective immediately.

As an article in the New York Times points out, the policy also offers the newly riffed more flexibility. Let's say your previous employer offered three different insurance plans and yours was the most expensive -- now you can switch to a less expensive plan and pay just 35 percent of the premiums. Another option: Maybe even 35 percent of the cost of the plan at your previous workplace is still more expensive than some private plans, but you have a preexisting condition that would make you ineligible for a new policy. You can opt for an individual plan for yourself with your old employer and put the rest of your family on the cheaper private alternative.

Some family members may even qualify for government-sponsored insurance. The stimulus package provided $87 billion to bolster state Medicaid programs, and children may be covered through the State Children's Health Insurance Program, known as S-Chip, which was also expanded to cover dependents of the newly jobless as part of the bill. Each of these changes means real savings for millions of Americans, who at least now won't have to add the additional worry of not being able to afford health insurance to not being able to find a job.

Russell Turk, M.D. is an obstetrician and gynecologist in Fairfield County, Conn. You can ask him your questions about health care issues by leaving a comment.

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