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Jobless face difficult choice
Health insurance hard to keep
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Published: January 10, 2009
The rising unemployment rate has more Triad residents and families facing a tough financial choice about their health.
Do they absorb the high cost of COBRA protection or other short-term insurance options on a tight budget? Or do they gamble that they will stay healthy enough for an extended period -- or get a new job quick enough -- and spend the limited money they now have elsewhere?
Health-care analysts said that most families, especially those with members with pre-existing conditions, somehow find a way to retain health-insurance coverage either from COBRA, through their former employer, or in short-term coverage obtained independently.
But a national study released yesterday by Families USA, a consumer-health advocacy group, found that the COBRA premium for a family in North Carolina can eat up to 82 percent, or $1,028, of the average monthly unemployment benefit of $1,248.
For an individual North Carolinian, the COBRA premium can run 30.4 percent, or $380.
"COBRA health coverage is great in theory and lousy in reality," said Ron Pollack, the executive director of Families USA. "For the vast majority of workers who are laid off, they and their families are likely to join the ranks of the uninsured."
The study found that for nine states -- Alabama, Alaska, Arizona, Delaware, Florida, Louisiana, Mississippi, South Carolina and West Virginia -- the cost of COBRA premiums for a family equals or exceeds the average monthly unemployment benefit provided in the state.
Ever since Congress created COBRA coverage in 1986 with the passage of the Consolidated Omnibus Budget Reconciliation Act, it has had a reputation as a necessary evil because it serves as a stopgap until most people can get coverage from a new employer. COBRA extends an employee's access to health-care benefits for up to 18 months after leaving a job, but the employee must pay the entire premium.
Most people don't realize how much of their health-insurance cost is borne by an employer until they face paying COBRA premiums, said Steve Graybill, a senior health-care analyst for Mercer Human Resource Consulting in Charlotte.
"They truly do not recognize the fact the most employers are paying 70 percent to 80 percent of the total cost of health insurance," Graybill said.
"Being without health insurance is a dangerous proposition, but many have to choose between paying rent and being insured," he said. "Many folks roll the dice or play the waiting game, as you have 60 days to elect for COBRA and 45 days to pay."
It's likely that more local residents are relying on COBRA considering the region's jobless rate reached at least an 18-year high of 8 percent in November. According to the N.C. Employment Security Commission, there were 15,685 unemployment claims filed in the Triad during November.
The state's rate was 7.9 percent in November. Economists have forecast that the Triad and state rates could exceed 9 percent this year.
The U.S. jobless rate hit a 16-year high of 7.2 percent in December, with 524,000 jobs eliminated, the U.S. Bureau of Labor Statistics reported yesterday. The nation lost 2.6 million jobs in 2008.
Graybill said that short-term insurance plans are an option, but can be limited in their value. They also are marketed to recent college graduates, new employees in a benefits-waiting period, independent workers, temporary or seasonal employees, and retirees with a short wait for Medicare.
"Many people need to review how they approach medical-insurance purchases and look at high-deductible health plans, $1,000 deductible plus, as an option to lower insurance premiums and protect them against financial ruin," Graybill said.
Michael York, the president of Blue Moon Benefits Group in Clemmons, said that interest in short-term health coverage has risen in the past year and should increase more in 2009.
"When I speak with a potential client, I ask them if they or a family member have any ongoing health issues, such as cancer," York said. "If they do, that can be a big detriment to their ability to get insurance in the individual health market."
Blue Moon has developed a niche helping pre-65 retirees with self-insured coverage. That includes filing for a federal health-coverage tax credit, which is offered to employees whose jobs were eliminated because of foreign competition.
"From our client base, I don't think there are a huge number of people rolling the dice on not having health insurance," York said. "I think most do what they have to do to have the coverage."
■ Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
Comparing COBRA costs
The cost of COBRA premiums for unemployed North Carolinians is higher than in most neighboring states. The figures are monthly averages.
State - Jobless benefit - COBRA cost for individuals - COBRA cost for families
Alabama - $869 - $372 - $993
Florida - $1,013 - $371 - $1,037
Georgia - $1,181 - $365 - $1,013
Kentucky - $1,309 - $357 - $926
Maryland - $1,340 - $370 - $1,058
North Carolina $1,248 - $380 - $1,028
South Carolina - $1,029 - $378 - $1,029
Tennessee - $960 - $353 - $939
Virginia - $1,245 - $386 - $1,079
West Virginia - $1,017 - $410 - $1,059
U.S. average - $1,278 - $388 - $1,069
Source: Families USA
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