For people who've assumed they'll take the option of continuing their employer-based health insurance -- at their own expense -- if they lose their jobs during 2009, it was sobering news. For those who have lost their jobs, it was painfully unsurprising.
In a report released earlier this month, researchers found that the average national cost of that coverage (an option known as COBRA, an acronym for the legislation that created the opportunity) eats up 30% of unemployment benefits for individual coverage and almost 84% for family coverage.
"COBRA health coverage is great in theory and lousy in reality," said Ron Pollack, executive director of health insurance reform advocacy group Families USA, based in Washington, D.C. The group announced the results of its analysis Jan. 9.
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COBRA cost's sticker shock
The report is especially worrisome because even at COBRA's very high costs, it is "often the only option for people who are looking for comprehensive coverage -- particularly if they have any kind of health problem," says Karen Davenport, director of health policy at the Center for American Progress, a liberal think tank in Washington, D.C.
Companies are permitted to charge, and generally do, the full cost of premiums plus a 2% administrative fee. COBRA must be offered by firms with 20 or more employees as long as they continue to offer health coverage. Generally, it's offered for 18 months after a job ends, though in some circumstances that can be extended. In many states and in the District of Columbia, health insurance options similar to COBRA must be offered by firms with fewer than 20 employees.
The staggering cost of COBRA can come as a surprise because employers often pay a very large -- and frequently unrecognized -- share of health insurance premiums.
In 2008, employees paid an average of 16% of premiums for individual coverage and an average of 27% for family coverage, according to the Families USA report. But once the employer drops the cost-sharing, premiums soar. Last year, the full COBRA costs for an individual reached a national average of $4,656 per year, or $388 per month. The full cost for family coverage hit a national average of $12,823, or about $1,069 per month.
In California, individuals receive an average monthly unemployment benefit of $1,322 and pay an average monthly COBRA payment of $380, or almost 29%, of the jobless benefit. Californians with families receive that same $1,322 unemployment benefit, but COBRA premiums for families can rise to $1,079 per month, or 81.6% of the unemployment benefit.
