I was going to write a nice dry post about all the changes that the economic stimulus package (ARRA) made to COBRA, but then I noticed that it has been done by many who have spent a considerable amount of time researching it.
Instead, I’m going to update my COBRA story.
I. Draconian Decisions
Like any employee working for a large company, at the time of my layoff I was given the option to extend my health coverage, at the low, low price of $1400/month for health coverage and an extra $100/month for vision and dental. I also had a dilemma: Part of the terms of severance was a short extension of health coverage, but as far as I could tell, I had to opt-in to COBRA to receive it.
So I did. I also set aside the $1500 for the February coverage from savings, leaving me with very little in the way of cash to get by, but for us, health insurance is an imperative. Beyond February, I wasn’t sure what to do. There was no way I could afford another $1500 payment, and if I didn’t have another job I wasn’t going to have coverage, so it was back to comparing plans that were no comparison at all to what I had.
My current plan is a PPO with a low deductible, pharmacy benefits, and decent catastrophic coverage. The individual plans I was comparing had $10,000 deductibles, no pharmacy benefits, and I would more or less be out of pocket for any doctor visits. The upside? I could get one for about $700/month.
I tried to estimate what doctor/pharmacy costs would be entirely out of pocket, and realized my net cost would be about $500/month on top of the $700/month, because without the pharmacy benefit, I pay full retail for medications that are necessary for our family.
It wasn’t much of a choice, because adding a monthly cost equal to a decent-sized house payment to the budget in a time where I wasn’t working (and freelance work is scarce, too) really meant I would have to risk having no insurance at all, and paying the out-of-pocket costs for the medications.
It also meant that I did not have the means to go down the route of self-employment and a reinvented career, and most importantly, the risk of having no insurance meant we could lose our house or declare bankruptcy if one of us became seriously ill.
These are not light decisions to make. No matter which way we went, the pathway was dark and uncertain. They are decisions millions and millions of laid-off workers are making every day. I am not unique at all.
II. President Obama understands that health care reform is the center of recovery
My light came in the form of the House version of the economic stimulus bill. The original version included an 18-month subsidy for laid-off or terminated workers (provided it wasn’t for cause) of 65% of the COBRA premium. Do the math for me, and it comes out to something far more manageable (around $490/month, plus $100 for the dental/vision if I opt into that).
As I watched the bill go from the House to the Senate, my hopes were dashed. The Senate version of the bill had no provision for COBRA subsidies, and the rumors I was hearing said they had no intention of including them. Fortunately, enough noise was made about it (from those within the administration and those like me, who were urging calls to Senators) that it was included in the compromise.
Unfortunately, the compromise watered down the subsidy to 50% and 12 months. Still, better than nothing.
Now we have the final version. It provides for the 65% subsidy for a 9-month period. This means that those of us who have joined the ranks of the unemployed can now breathe a little easier while we figure out what to do next, whether it be to launch a new venture, find a new job, or do whatever we have to for our families to eat and have shelter.
III. Real stories of how it works
Health care reform is at the center of our economic well-being. Extending COBRA gives unemployed workers a chance to breathe and get affordable insurance to bridge the unemployment gap. It also leaves those same workers with a far higher percentage of disposable income to put back into the economy in the form of spending, or perhaps simply being able to swing their house payments and stave off foreclosure while getting back on their feet. Either outcome works to better the economic big picture.
My neighbor’s story is similar to mine, except that she is a casualty insurance underwriter who has been out of work for nearly six months. At the time of her layoff, she’d just managed to renegotiate her mortgage to a manageable level and was getting back on her financial feet after nearly losing her home.
Being laid off meant she had to make a choice between health insurance and mortgage payments. She chose the mortgage. Opportunities in her line of work are scarce and far between. She goes on interviews all the time for related jobs, but a job with her skills is hard to find right now. When AIG has to be bailed out and bought by the federal government, it’s not a great time to be looking for casualty underwriter jobs.
The stimulus bill, though, offers hope. All of those projects to build bridges, fix roads? They’re going to be bid on by contractors, and those contractors are going to have to have casualty insurance as part of their package, which in turn means that casualty underwriters, particularly ones with experience in the building/contractor market, will be in demand.
That means she may have employment sooner than she thinks. When she’s employed, she can catch up on her mortgage, and begin to buy things that may be more than the absolute minimum to get by. It means her college-aged daughter can go back to school instead of working full-time at a minimum wage job to help with family expenses.
For me, I now have the space to consider the possibility of launching my own business or at the very least, working freelance while the web community landscape stabilizes a bit. If I go the route of self-employment, I will be putting funds back into the economy and becoming part of the backbone of what makes this country great: the small business meeting niche needs in creative and cost-effective ways.
Remember these two stories when you hear the naysayers tell you that the country is going to hell in a handbasket because the government is spending money. Make no mistake: The government has been spending money for years, long before President Obama was elected. It just wasn’t spending it on us.
Now it is. And we have a responsibility to be responsible, too, and take care of business, try to find jobs, try to invent ones. I honestly think there will need to be a second piece of legislation that extends the 9 month period, because the key to true, long-lasting economic recovery is going to be true, deep health care reform that doesn’t put a bandaid on an ailing system.
Tell us how you’re affected by the stimulus package. Do you have more hope for your future? Do you see opportunities? Leave a comment.
