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.

Please take a minute to call your Senators today.

As I was researching a post to explain why the COBRA provisions contained in the House version of the economic stimulus bill are so critical to economic recovery, I discovered that the Senate version of the bill does not have any provisions for subsidizing COBRA benefits to terminated and laid-off employees.

The COBRA subsidies are, in my opinion, one of the key parts of any recovery. Here’s why:

• Companies are laying off more and more workers, and those workers cannot or will not be able to afford to continue their health insurance at the COBRA rates. This means we will add 3-5 Million more to the ranks of the uninsured, placing a much larger burden on our economy than we have now.
• Those who do manage to opt for COBRA benefits are likely to be those with chronic illness who absolutely must have health insurance coverage, resulting in adverse selection for the health insurers and companies maintaining the COBRA benefits. Down the line, this will mean higher and higher costs for everyone.
• Laid-off workers who are uninsured run the risk of bankruptcy and foreclosure if any medical catastrophe should hit, exacerbating the issues already rampant with regard to mortgages and housing.

The COBRA subsidies should not be optional or negotiable. The fact that they are not even contained in the Senate bill is disturbing and of great concern.

Here is a link to a tool to email your representatives. Please call your Senator today and urge them to include the COBRA subsidies in the final compromise bill.

If you’re recently unemployed, I’m sure you’ve had the same experience as I when that COBRA notice arrives in the mailbox. That generous offer of the opportunity to continue your employer’s health coverage just doesn’t seem quite so generous when you read the page with the premiums. Mine arrived just the other day. By my calculations, maintaining coverage under COBRA will require me to magically produce a payment equal to a hefty mortgage payment at a time where I’m unemployed.

At the time of its passage, COBRA was a great idea, a concept intended to help workers bridge the time between jobs with existing health coverage rather than trying to find their own. It worked for about six months, and then premiums started climbing at an alarming pace, and haven’t leveled out yet.

Families USA published a study today which clearly illustrates the problem with COBRA: In 41 states, COBRA Premiums Cost more than 3/4ths of Unemployment Benefits; in Nine of those states, They Cost More than 100 percent.

The average unemployment insurance (UI) benefit varies substantially from state to state, as do average COBRA premiums. According to the report:

* On average, nationally, UI monthly benefits are $1,278, while COBRA monthly premiums for family coverage are $1,069, or 83.6 percent of UI benefits.

* In 41 states (AL, AK, AZ, AR, CA, CT, DE, FL, GA, ID, IL, IN, IO, KS, LA, ME, MD, MI, MS, MO, MT, NE, NH, NM, NY, NC, ND, OH, OK, OR, PA, SC, SD, TN, TX, UT, VT, VA, WV, WI, and WY) plus the District of Columbia, COBRA family coverage premiums, on average, consume more than three-fourths of average UI benefits.

* In nine of those states (AL, AK, AZ, DE, FL, LA, MS, SC, and WV), the average COBRA premiums equal or exceed average UI benefits.

* In 17 states (AL, AK, AZ, DE, FL, LA, ME, MS, MO, MT, NE, NH, SC, SD, TN, WV, and WI) plus the District of Columbia, COBRA premiums for single coverage of workers consume, on average, more than one-third of UI income.

“COBRA health coverage is great in theory and lousy in reality,” said Ron Pollack, Families USA’s Executive Director. “For the vast majority of workers who are laid off, they and their families are likely to join the ranks of the uninsured.”

That’s right. Get laid off, face the choice to eat and pay the mortgage or forego health insurance. The weight of job loss is clearly heavier with the prospect of losing everything if anyone in the family is ill in the interim.

Worse yet, employees eligible for COBRA can’t go out and get an individual policy that might cost less than the COBRA continuation policy, because they’re eligible for COBRA. If they opt out of COBRA, they’re not released to shop for an individual policy because they could have opted COBRA.

It doesn’t work. I’m not sure what we’re going to do here, because pre-existing conditions mandate continuing coverage, but at the same time, the payment is more than our house payment.

Read the full study here (PDF).

Are you caught in the COBRA’s grasp? Post a comment with your story. Let’s get the word out and include it in the health care reform debate.

Just over a year ago, US Senator Barack Obama spoke these words:

One year from now, we can stop campaigning on the outrage of 47 million uninsured Americans and finally start doing something about it.

That time is NOW. Yes, the economy is in the tank, Israel is bombing Gaza, we have troops in Iraq and Afghanistan is looking gloomier by the day. Still, the true foundation of the ‘fierce urgency of now’ is reforming our health care system and opening access to all citizens of this country without regard to employment or pre-existing conditions.

As employees are laid off and jobs outsourced to foreign countries, more and more people are faced with this choice: Go bankrupt paying for health insurance or go bankrupt paying for health care. I know this from personal experience. I am a self-employed person who was also a full-time employee with health insurance benefits until December 31st, when I also made the layoff list.

The fierce urgency of now means that I must maintain my health insurance for me and the family no matter what the cost, because of pre-existing conditions which require that I have continuous coverage in order for them to be covered in the future. Did you follow that? It’s an important distinction for many, many Americans facing layoffs and looking for new jobs.

The cost for me to continue this insurance is exhorbitant. It costs twice what I can get as an individual, except that if you are an individual and you have COBRA continuation available, you must exhaust the COBRA coverage first. That means that I will pay $1,300 per month instead of $650 per month for similar coverage as an individual.

Or, I can go without coverage and take the risk that no catastrophe strikes our family before I find another job with insurance. That would also mean we would be forced to wait six months before getting any coverage for pre-existing conditions, which could be a catastrophe in itself.

I’m one of the lucky ones. Other families have no means with which to pay for health coverage and have to rely upon good luck and Medicaid, which means they are less likely to focus on wellness, much more likely to wait until a condition becomes an emergency, and ultimately become the responsibility of the government.

On the business side of things, profit margins drop with every new enrollment period. Employers shave away benefits without dropping them completely in order to stay afloat.

Health care is not optional. When George Will rather sneeringly suggests that the issues surrounding Medicare are a function of overutilization, price-fixing, and — gasp! — recipient ignorance about the cost of goods and services being furnished to them while ignoring the fact that the patient is a captive audience, he misses the larger and far more urgent picture: People die without health care. If they can’t pay for it, the government picks up the tab. This is because health care is as urgent a need as shelter, food, and warmth, and it is slipping from our grasp in real time.

I have paid (or my parents, their employer and my employers have paid) for health insurance since the day I was born. After 50 years, I do not wish to be told that I am responsible for a drain on the national budget or a spike in the national debt. Amortize what has been paid by me and on my behalf for 50 years and it will surely exceed the average lifetime cost of health care that has been provided to me, even with the birth of three children on that tab.

This is it: the future of our country in real time. ‘Bankrupt or bare’ are not viable options. Health care reform has to be on the agenda at the very first Cabinet meeting on January 21st. President-elect Obama has asked for our stories, suggestions, and solutions to the problem. Let’s be ready to serve them up on the first day of his Presidency.

Here are my suggestions for the first steps to take:

• Establish baseline federal standards for health care that override the widely varying current state-to-state standards.
• Begin an immediate public audit of the payor/payee system, beginning with insurers and related entities. There should be full transparency as to actuarial assumptions used to calculate premiums, criteria for claims processing, administrative fees and costs, as well as any profit-taking from related companies. In particular, examine the relationships between Pharmacy Benefit Managers and Insurers, which appear to me to be rather incestuous in some cases. This audit must be undertaken in public, in real time, either via streaming video, webcam, or on CSpan so that the public will have the opportunity to follow and participate.
• Give immediate education financing incentives to qualified pre-med and medical students to enter the field of general medicine rather than specializing.
• Streamline and consolidate medical records. Electronically, of course.
• As a stopgap measure, open enrollment in the Federal government plans to private citizens at the same rates (as candidate Obama promised) so that laid off, unemployed and self-employed individuals have the opportunity to buy health insurance at a cost that won’t bankrupt them and get coverage that will be meaningful when needed.

These are my first-blush ideas. We have 2 weeks until Barack Obama’s inauguration. I hope you’ll add your ideas, thoughts, suggestions and stories in the comments. As more voices rise, so will the best ideas rise, answering the urgency, the absolute need of NOW.