‘COBRA Conundrum’ Transcript

Note: This transcript has been created with a combination of machine ears and human eyes. There may be small differences between this document and the audio version, which is one of many reasons we encourage you to listen to the episode!

Dan Gorenstein: As this pandemic ravages the health and wealth of our country, it is hitting millions of Americans with a kind of 1-2 punch. They’re losing their jobs and their health insurance.

Jon Gruber: This is totally unprecedented. We’ve never seen such a dramatic increase in such a short period of time.

Sayeh Nikpay: Federal lawmakers are now considering how to help these people who suddenly find themselves uninsured in the middle of a pandemic.

DG: It’s April 23. From the Annenberg Studio at the University of Pennsylvania, I’m Dan Gorenstein.

SN: And I’m Vanderbilt economist Sayeh Nikpay, and this is Tradeoffs.

News clip: The Coronavirus is putting millions out of work…
News clip: Unemployment numbers in the United States are hitting unprecedented highs…
News clip: 22 million Americans say they’ve lost their jobs since this crisis began…

DG: One of those millions to get socked by that 1-2 combo is Mayra Jimenez, a 35-year-old server in San Francisco.

Mayra – who has the chronic condition ulcerative colitis – needs insurance. Just one of her meds is $18,000 a year.

But she brings in too much from unemployment to qualify for Medicaid.

Mayra Jimenez: So when I first got laid off on March 17th, I knew that my first option was going to be COBRA. Because I’ve left jobs before so I knew that was always an option.

SN: COBRA is the program that allows people to keep the coverage they had through work.

But it puts them on the hook for the entire premium.

Employers, on average, pay about 80% of a single employee’s premium, so the full cost of COBRA can cause some sticker shock.

DG: Like when Mayra learned COBRA would cost her $426 bucks a month.

MJ: I mean, that’s almost half my rent. I mean, I have very cheap rent in San Francisco, but like that still like almost half my rent for my medical care.

DG: And that’s just her premium.

That doesn’t include copays and other expenses.

But that wasn’t her only option

MJ: And then I was like, Oh, there’s Covered California as well.

SN: That’s the state’s Obamacare exchange.

As glad as Mayra was for an alternative to COBRA…she found the exchange daunting.

MJ: I’m looking at the sheet, the benefits table right now and it’s like two, four, six, there’s seven options for me in plans. It’s…it’s a lot to take in.

DG: So here’s the deal…Mayra can go with the COBRA plan…expensive, but straight forward…or keep trying to figure out the exchange.

The pressure is on if she wants coverage by May 1st.

DG: Some in Congress want to help the millions like Mayra, who were employed with insurance just a few weeks ago…and now have neither.

Without help, many of these people may go uninsured, leaving them vulnerable in the midst of a recession and a pandemic.

So last week, the House Democrats decided to do something.

News clip: Virginia Congressman Bobby Scott has introduced a bill that would have the federal government pay 100-percent of COBRA costs during the pandemic.

SN: Under what’s called the Worker Health Coverage Protection Act…

DG: That’s a mouthful.

SN: Yeah, the feds pay the employee’s entire COBRA premium. 100%.

And people get to keep their same doctors, same deductible – all of it.

Chris Holt, of the center-right think tank the American Action Forum, says that’s a big deal.

Chris Holt: Particularly if we’re thinking about families that are filing for unemployment. It may not be an ideal time for them to be going through health insurance plans on the exchange. Trying to see if their kid’s pediatrician is in a different network with a different insurer. I don’t know how I would do that in amid all of these other sort of stressors.

DG: So keep what you had at no cost…sounds pretty good.

SN: Slow your roll, Dan.

Jon Gruber: COBRA is expensive. And for many employees, it won’t be there.

SN: That’s MIT economist Jon Gruber. He points to three downsides to the feds picking up the tab for COBRA.

JG: If you’re in a firm below 20 employees, you’re not covered.

DG: There are 10 states, including Michigan and Alabama that haven’t expanded COBRA, leaving people who work for small businesses out of luck.

JG: COBRA also doesn’t help you if your company goes out of business.

SN: If the company where you worked unfortunately goes belly up, your COBRA coverage does too.

DG: Finally, under COBRA, federal dollars just don’t go as far.

Unpublished Urban Institute estimates show an employer plan is, on average, about 25% more than a Gold Plan on the Obamacare exchanges.

JG: We need to be all hands on deck and spending whatever we can to help people. But that doesn’t mean we shouldn’t be thinking about efficient ways to do it.

SN: So those are the known drawbacks of a COBRA option. And there’s one more looming…

DG: Given all the competing needs for cash, there’s a good chance the Dems’ proposed 100% subsidy would get whittled down in negotiations…

SN: Lucky for bill sponsors, there’s actually some data that Congress can use as a guide if that happens.

Back in the last recession…

News clip: The U.S. economy continues to spiral downward
News clip: …lost 20,000 jobs in April…
News clip: Chairman Bernanke won’t say the “R-word.”

DG: Tucked deep into the bowels of the massive 2009 stimulus package…

News clip: The stimulus package could total $775 billion…

SN: Was a COBRA subsidy.

DG: Just like today, lawmakers wanted to help people who were struggling, so they agreed to pick up 65% of COBRA costs for people who lost their coverage.

Jill Berk: We found the 65% subsidy increased COBRA take up by five percentage points…a significant increase, but very, very much lower than you would expect.

DG: Jill Berk is a senior researcher at Mathematica. The Department of Labor asked Jill’s team to study just how helpful the subsidy was.

One of her most pressing questions: why didn’t more people take advantage of the opportunity?

JB: I think there are at least two stories. One is that knowledge of the subsidy was very it was very low.

SN: Makes sense…imagine opening a letter from your former employer with a bunch of legalese and health insurance jargon.

JB: For those that were aware, their most common overwhelming response was that COBRA was still too expensive.

DG: Back then, the average annual premium for a single worker, even with the subsidy, would have been about $400 per month.

JB: When you’re actually facing those choices, choosing between rent and food and other bills, that COBRA bill looks quite high.

DG: One final nugget from Jill’s work: People who said yes to the benefit were four times more likely to have a college degree and a higher income than those who passed on it. In other words, Jill found that the COBRA subsidy was least helpful to those with the greatest need.


DG: Millions of Americans have lost their health insurance as they’ve been laid off in the last few weeks.

Congress is considering subsidizing COBRA to help those workers keep their coverage just as they did in the Great Recession. But there’s another option that lawmakers have that they didn’t back in ‘09: the ACA.

JG: Before the Affordable Care Act, we saw 10 million Americans lose their employer sponsored insurance and they had nowhere to go. And the idea was to create a robust mechanism for people to get health insurance if they couldn’t get from the employer. So this is the perfect moment for these exchanges.

SN: Jon Gruber, several other economists and some Democrats are kicking around alternatives to the COBRA plan.

DG: Here are two ideas they’re proposing. The federal government increases subsidies for ACA plans, picking up a bigger share of premium and out-of-pocket costs. And extends that help to people above and below the current income cutoffs.

SN: Ok, Dan, a couple big upsides here…

1) The ACA’s subsidies are tied to what you earn so people who need more help, can get it. And you don’t waste dollars on people who are doing okay.

2) The exchanges can help a lot more people, including those caught in COBRA’s quirks. Not to mention the millions of others who have lost jobs but didn’t have insurance through work.

DG: Now let’s run through the downsides….

A big one, Sayeh: These ideas could end up costing the feds more because you’re giving more people more help.

Chris Holt from the American Action Forum still needs to be convinced people need that extra help.

CH: If that subsidy would have been good enough for someone at that income level six months ago, why is it not good enough now? I don’t know why we would need to increase subsidies in order to make the ACA a more attractive option.

SN: And one other little downside…the ACA—still a political football.

CH: Every time I think we’ve gotten to the point where we can kind of move on and sort of accept our baseline and work for policy solutions. There’s just so much both emotion, and frankly, there’s so much bitterness tied up in  the debates.

SN: For what it’s worth, COBRA has its hang-ups too. Chris expects a fight over whether subsidy money can be spent on employer plans that cover abortion services.

DG: Jon Gruber and Chris Holt agree that if the goal is to deliver real, fast relief then politicians might want to focus on the policy likeliest to pass.

SN: And that’s maybe leaving the ACA as it is and just making one tweak: let people take whatever ACA subsidy they’re already eligible for and apply it where they want, whether to their COBRA premium or on the exchange.

DG: While Congress ponders, Mayra had to move.

Mayra Jimenez: I paid 79 dollars and 17 cents.

DG: She bought a mid-level plan on the ACA, where she’s eligible for generous existing subsidies.

MJ: It’s better than what I had from my work and it should cover all my basic needs.

SN: It definitely took her a minute to figure out how to shop for health insurance, but Mayra managed and she even got to keep her doctors…luck not everyone will find on the exchange.

It’s the first time Mayra’s ever purchased insurance on her own, not gotten it through work, and that’s delivered an unexpected benefit.

MJ: Freedom. It feels so freeing to take charge of my health care and to know that no one can take this away from me. I don’t have to rely on a job to give me what they want to give me .I can make my own choices.

DG: Policymakers, health industry executives and doctors have been fighting over whether the United States should tie insurance to work since the end of World War II.

As millions of Americans lose their employer-sponsored coverage and other people perhaps have the same realization as Mayra, Jon Gruber hopes this moment turns into a movement to unwind that connection.

JG: It shouldn’t be when you lose your job, which is super traumatic. You suddenly say, oh my God, I’ve also lost my health insurance. That shouldn’t be the way our labor market works. It shouldn’t be that you’re afraid to leave your job because you’re going to lose your health insurance. We should instead divorce insurance from from the employer relationship.

That is a hard thing to do politically. But now’s the moment to recognize that we have a better alternative.

SN: Chris Holt is far more skeptical. It didn’t happen after the Great Recession, he argues, so why now?

CH: My gut is that, no, this doesn’t end up being that moment. And the reason for that, as as desirable as it would be, I think in the long run to divorce insurance from from employer benefits. There will there will just be too much incentive for employers to continue offering it.

DG: As states begin reopening businesses, some laid off workers will get back their jobs and their insurance.

SN: But many will remain unemployed and uninsured.

That’s why House Democrats have introduced this COBRA subsidy bill.

DG: The reality is it’s a narrow and expensive solution, and we saw it fall short a decade ago.

SN: Lawmakers now have the ACA at their disposal, a tool that seems better fit for this moment.

DG: Whether it comes in handy will likely have more to do with politics than policy.

SN: I’m Sayeh Nikpay.

DG: And I’m Dan Gorenstein and this is Tradeoffs.