While comprehensive, national health care reform looms in the long corridors of the White House and Capitol Hill, federal officials have responded to the current loss of jobs (and health insurance) with emergency measures. The American Recovery and Reinvestment Act of 2009, the "economic stimulus package" enacted in mid-February, sought to provide a safety net for individuals most severely affected by the economic downturn.
To do so, the new law provides temporary assistance in the form of a government subsidy for continuation of health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985. COBRA permits former employees and their families to maintain their employer-sponsored coverage under certain circumstances. Normally, these individuals would pay the full cost of coverage: 100 percent of the premium plus a 2 percent administrative fee.
The stimulus package provides temporary, subsidized COBRA premium assistance for workers who lose their employer-sponsored health care coverage due to an involuntary loss of employment between Sept. 1, 2008, and Dec. 31, 2009. Under the new law, eligible individuals pay 35 percent of the premium while the employer pays the remaining 65 percent. The employer may then claim its payment as a credit against wage withholding and payroll taxes. The government-subsidized coverage would last until the individual becomes eligible for coverage under another group health plan or Medicare or up to nine months.
For the many who elect the new lower-cost health care continuation coverage, consistent with current law, they will remain eligible for another nine months of unsubsidized COBRA coverage (in most cases), for a total of 18 months. The subsidy is not available to taxpayers with modified adjusted gross incomes exceeding $145,000 ($290,000 for joint filers) and proportionately reduced for taxpayers with AGI between $125,000 and $145,000 ($250,000 and $290,000 for joint filers).
The stimulus package therefore generally works within the current structure of COBRA coverage. The version of this legislation originally approved by the House of Representatives included a far-reaching COBRA provision that would have expanded duration of coverage, but it ultimately was stripped from the final agreement. Under the House-passed measure, individuals 55 or older or with 10 or more years of service with an employer would have been eligible to maintain COBRA coverage (on an unsubsidized basis) until covered under Medicare or another employer group health plan. This provision not only would have imposed substantial burdens on employer health plan sponsors, it would have constituted a dramatic expansion of COBRA coverage obligations.
Employer groups argued - and Congress agreed - that such an historic and permanent expansion of coverage obligations, regardless of merit, was an inappropriate feature of "emergency" or "stimulus" legislation. The broader issue of coverage expansion should more appropriately be considered as part of comprehensive health care reform, at which time it can be carefully examined and debated.
Nevertheless, the final stimulus package did include an overture to the larger health care reform debate. The measure dedicates $19 billion to accelerate adoption of interoperable health information technology systems by doctors and hospitals, which is intended to make information flow through the health care system more efficiently. The new law also devotes another $1.1 billion for comparative effectiveness research, designed to evaluate and compare the clinical outcomes, effectiveness, risk and benefits of various medical treatments. These provisions demonstrate a clear indication that evaluations of health care quality are essential to reform of cost and coverage.
Enactment of the COBRA provision was troubling in some respects and encouraging in others. The law went into effect on March 1 with little guidance for employer plan administrators and creates a legion of compliance issues. On the other hand, its consideration was largely bipartisan, free of controversy and explicitly recognized the value of employer-sponsored benefits. We must be sure to remind lawmakers of this fact once the real debate begins in earnest.
James A. Klein can be reached via e-mail at info@abcstaff.org.
