Many workers don’t learn how much their employers pay for their health insurance until they leave their jobs.
Under the Continuation of Health Consolidated Omnibus Budget Reconciliation Act, better known as COBRA, employers with 20 or more employees must offer terminated employees a continuation of health care benefits for a limited time. But there is a catch. Employees must pay the entire premium. Most find the cost, sometimes hundreds or even thousands of dollars a month, prohibitive. It suddenly makes sense why that raise was so tough to get.
Now, in this unprecedented time in history when millions of people are suddenly without jobs due to government lockdowns, Congress, under heavy lobbying by insurance companies, big business, and labor unions, is gearing up to wave its magic wand and make the pain of COBRA disappear. Congress wants taxpayers to fully fund COBRA payments for an undefined period. Never mind, that this could extend the nation’s economic pain by making unemployment even more attractive. This is bad policy from a health policy point of view.
By picking up the cost of COBRA premiums for those who lost their jobs, Congress, once again, would be sheltering consumers from the true costs of health care. Health insurance is no longer a financial tool to help individuals and families protect themselves from catastrophic medical bills, it has become a convoluted payment plan that artificially drives up costs. When a third-party payer picks up the tab, prices no longer reflect what a consumer is willing to pay, but what a provider has been able to wrangle from that payer. Sometimes payments make up for under-reimbursement from Medicare and Medicaid.
Congress should forget about subsidizing COBRA, which go directly into the hands of health insurance companies and instead, use the unemployment crisis to restore some free-market forces to the health care market that would benefit consumers in the long run. Instead of subsidizing COBRA, lawmakers could better serve Americans by funding individual health savings accounts (HSAs).
If they were spending their own money, some people would choose a plan that costs less but provides first-dollar coverage for fewer services . If what people value most is protection from a financially catastrophic but rare health event, perhaps they’d appreciate a low-premium health insurance plan with a high deductible.
These plans exist. For example, short term limited duration insurance (STLD) plans are affordable, often with premiums less than $100 a month, and designed exactly for someone temporarily out of the workforce. In 2018, the Trump administration reversed Obamacare rules by making these plans available for one year and can be extended for up to three years. However, their availability varies from state to state. Twelve states still limit or ban STLD outright, according to the Foundation for Government Accountability. Regrettably, they are the states most likely to face huge economic headwinds from the pandemic lockdowns, based on a new report by the Committee to Unleash Prosperity.
Congress should also consider expanding HSAs to allow consumers to use the accounts on direct primary care (DPC) membership-type arrangements. Consumers are gravitating to DPC because they appreciate their affordability and quick access to primary care. DPC continued to function under lockdowns because the practices were already using tele-medicine and phone consultations to care for their members. Practices in traditional fee-for-service models rarely offered phone or telemedicine consults because third-party-payers don’t pay for the service. Lockdowns sidelined those practices and now a number of them are struggling to stay open.
If Congress subsidizes COBRA insurance premiums for an indefinite period, the nation will lose an opportunity to reform our broken health care system. By decentralizing health care decision making by encouraging people to use HSAs and more insurance options, like STLD, the nation can focus on what it really wants out of health care: better health. Spending more money and diverting it to health insurance companies doesn’t achieve that.
AnneMarie Schieber ([email protected]) is managing editor of Health Care News and research fellow at The Heartland Institute.