COBRA Subsidy is Gone: Now What?

Photo (cc) by leoncillo sabino

If you lost your job May 31, Uncle Sam will pay 65% of your COBRA health insurance bill for up to 15 months. But if you lost it June 1, you’re on your own.

The 65% subsidy was part of the $787 billion stimulus legislation passed in 2009. The subsidy was originally slated to last nine months, but was later increased to 15 months. It applied to those who lost their jobs between September 1, 2008, and May 31, 2010. There was talk of extending the benefit until the end of 2010, but Congress ultimately concluded the nation couldn’t afford the additional $7.8 billion it would have cost.

COBRA refers to the federal law guaranteeing that all workers are entitled to retain their health insurance coverage from former employers for up to 18 months after leaving a job, but it doesn’t help with the cost. Under COBRA, former employees must pay the entire premium, not just the portion they paid when they were employed.

According to Families USA, a consumer advocacy group, the monthly premium on a COBRA policy uses an average of 84% of a typical unemployment check, leaving those without savings, other income or help from the government unable to maintain their health insurance policies.

CNN Money recently asked people to write in and describe how they’re coping, and the stories they got back weren’t pretty. An example from that article:

Debbie McBride knows exactly what the newly unemployed are going through. McBride, who lost her administrative assistant position at an aerospace company in February 2009, just exhausted her 15-month subsidy and is now left to fend for herself.

Unable to afford her $390 unsubsidized monthly premium, McBride refilled her five prescriptions last month. She has looked for cheaper health plans but can’t find one, especially now that she has diabetes.

McBride has yet to pay her June premium because she doesn’t have the funds. The La Habra, Calif., resident said she doesn’t know what to do.

“Where are we supposed to get the extra money?” she asked.

Options for those who can’t afford COBRA

For some of those unable to afford their previous employer’s health insurance without the COBRA subsidy, finding a replacement policy will be relatively painless. For others it will be impossible.

Several websites, including MoneyTalksNews.com, can help you search among health insurance providers to find the least expensive policy.

Search insurance policies on MoneyTalksNews.com.

If you’re young, healthy and willing to choose a high-deductible policy that offers what’s known as “catastrophic coverage” (for example, a policy that only covers qualified expenses in excess of $5,000 per calendar year) you might find coverage for less than you were paying under COBRA – even with the 65% subsidy. A mid-20s person in good health can probably buy that kind of coverage for less than $200 a month.

But the older you are, the more you’ll pay. If you need medication and/or regular doctor visits, the cost of a policy may be prohibitive. And if you have a pre-existing medical condition that renders you uninsurable, the only way you’ll have any kind of insurance is to be part of a group plan – which means either sticking with your former employer’s plan under COBRA for as long as you can, or finding a new group.

There’s also Medicaid. While Medicaid qualifications differ from state to state, in general there are three main groups of people who are eligible: children under 18 (under 21 in some programs), pregnant women and those in families with small children. If you’re not in one of those groups, you’re probably out of luck.

Learn more about Medicaid from the Department of Health & Human Services.

While health care reform is still a controversial topic with plenty of potential drawbacks (example: check out this recent story about a coming tidal wave of tax forms), one of the primary features of the new law is helping the unemployed maintain health insurance, as well as providing subsidies, free health insurance for those who can’t afford it, and a guarantee that you can’t be turned down for pre-existing conditions.

Check out ‘8 Positive Changes Because of Health Care Reform’.

Too bad many of those benefits won’t be entirely available until 2014 – a date by which many of today’s unemployed workers will either be broke – or worse. If you’re interested, here’s the time line for health care reform.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
Half of All Retirees Say They Fear This
Half of All Retirees Say They Fear This

Chances are good that you share this fear. Here’s a way to overcome it.

14 Things We Buy and Then Almost Never Use
14 Things We Buy and Then Almost Never Use

Save your money. These items seem alluring but they often end up as coat racks and dust magnets.

9 Things You Should Never Pay For With a Debit Card
9 Things You Should Never Pay For With a Debit Card

Use your debit card for one of these expenses, and you could risk your bank account balance, your credit score or even identity fraud.

Grow Your Savings in 2020 With These 5 Tricks
Grow Your Savings in 2020 With These 5 Tricks

Saving money doesn’t have to be painful. Here are some ways to game yourself into stashing more cash.

10 U.S. Jobs That Are Disappearing Fastest
10 U.S. Jobs That Are Disappearing Fastest

Think twice before pursuing these shrinking occupations.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

10 Things You Should Never Do With Bleach
10 Things You Should Never Do With Bleach

Does the pandemic have you reaching for bleach more than ever before? Learn the ins and outs of using this powerful disinfectant.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.