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Dear Everyone!
Everyone and their dog is (are?) calling me about the new legislation having to do with COBRA. Like so much the government does, this is a half-baked idea, one that I think might cause more harm than good.
This is another case where it is best to not rely on either your employer or the government. Even though I sell a lot of group health, I still believe that an individual policy is a better deal (assuming you can get one.)
The same goes with life coverage and disability coverage. Indeed, I think it is time that people started thinking about taking care of themselves because I'm not sure that the employer or the state is going to be able to do so, given the economy, the budget deficits, and the (un)employment picture.
As Billie Holiday once sang, "God bless the child thats got his own."
-Al
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The COBRA Mess
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If you have been the reading papers or watching the news you have heard about how the federal government has extended COBRA.
COBRA is a program that "allows" people who lose their employer-paid group coverage to continue it... but at their own cost... in addition to 2% to 10% more.
COBRA has never been very popular because it is has always been very expensive. Here is why.
Most people have no idea what health coverage costs until they are faced with the prospect of getting COBRA. For example, a lot of companies pay 80% of the employee's health coverage. If that is the case for you, take whatever the boss takes out of your check each month and multiply it by five. If you are paying $150 a month, the total cost is $750. You boss is paying $600 and you've been paying the rest.
It is a rude awakening when people are terminated (or divorced) and find out "for real" what the cost is... and often there is a 10% kicker. The above example would cost the out-of-work employee $850. What is the first thing they do? They call me and want individual coverage ASAP... because individual coverage is almost always less expensive.
The new COBRA legislation says that instead of you having to pay 100% the government will pay 65%. Sounds like a good deal to me, right? In the above case you would pay $288. That beats $850!
But there is a catch. First, it is only going to be for 9 months.
The second is that the 65% is FIRST paid by the boss and the government will reimburse at a later date... maybe much later. That means the boss has to front the money.
Third he has to do this for everyone who started COBRA since late last year!
This might not be so bad if he could borrow the money, but as we all know the banks are not lending to anyone, much less your average small biz.
Is there the distinct possibility that a lot of businesses will drop their health plans? I think there is.
So why will the company drop their plan? The law has always been... no health plan... no COBRA. If you are on COBRA and your ex-company either goes out of business or drops their health plan, you lose COBRA benefits.
If the company changes health plans you get to be on the new one. But I foresee a number of companies who can't make the new 65% payments on a lot of ex-employees and who will just say to their workers "Hey folks, sorry but if we do this we will go out of business. Do YOU want to keep your job?"
Would you rather have a job and no group health coverage or no job and no group health benefit?
I don't know what the "statute of limitations" is on this. I don't know what the interval between plans will be so that the company can "escape" paying this 65% COBRA.
As much as I want health insurance reform, this new set of regulations makes no sense. Asking a business to pay 65% of COBRA premius for people who are not working for them (not productive) is going to raise some issues in a lot of board rooms such that a fair number may just say "If we can't get the money to front this we will go out of biz before we get reimbursed so lets forget about our current plan and dump it."
This much I can tell you. If you know what is best for you, you will drop your group health plan now (if possible before open enrollment... sometimes it is and sometimes it isn't... ask your HR person) and get your own individual coverage.
Sure it might cost a bit more because the boss is not paying it (unless you can cut a deal with him or her... it is done all the time) but you would be covering your own butt by doing so.
I preach to people all the time to try to work things out so that they are not dependent on their job for health coverage, but I've never been that successful. However, with a lot of people being downsized and the high cost of COBRA a lot of people are seeing the wisdom of having their OWN coverage. Yes, it cost them a bit more... but if they lose their jobs at least it is affordable... unlike COBRA.
Is the new 65% employer paid deal... a good deal? I suppose for nine months it is... so long as the company does not drop their plan... or worse... go paws-up!
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Well, that's a wrap for this issue. I hope you've found some of the info above useful and interesting. If you have questions about life or health coverage, safe-money annuities, or employer group benefits just give me a call or send email.
Sincerely,
Alan N Canton
InsuranceSolutions123 Agency
InsuranceSolutions123.com
916-962-9296
CA License # 0F31110
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Al Canton, Owner
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I'm Al Canton, owner of the Insurance Solutions Agency.
Everyone promises the best service, etc. So I won't bore you with that message.
Bottom line, I know health insurance, disability, Medicare, life, and annuities.
Most importantly, I'm honest. I will not put you in a product just for the money. I've lived in the Northern California area for 35 years and I've built my reputation on integrity and honor.
It's that simple.
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