COBRA Subsidy Program is Down Payment on Health Care Reform

Mar 2009

In his address to a joint session of Congress on February 24th, President Obama mentioned that the idea of universal health care goes back to the Truman administration. Successive administrations have approached the issue, with limited success, although Lyndon Johnson enacted Medicare and Medicaid.  Since then, federal and state governments have taken a piecemeal approach.

President Clinton signed the Children's Health Insurance Program (CHIP), which went a long way in covering children and teens of working families who would not otherwise afford the premiums. With the help of federal money, some states, including New Jersey have expanded CHIP to cover working adults.

In New Jersey an estimated 1.5 million persons remained uninsured. Last year, state lawmakers unveiled plans to bring universal health care to New Jersey within three years by requiring its uninsured residents to buy coverage and using state funds to provide reduced-cost policies.
 
In 2007, Massachusetts enacted a similar plan, but it remains under funded.
 
According to a report issued by Families USA, a Washington-based nonprofit group, health care premiums in New Jersey rose 71 percent while earnings increased just 15 percent between 2000 and 2007.

New Jersey ranked 28th among states in the rate of growth in premiums compared with earnings.

While the recession is expected to increase the ranks of the uninsured in New Jersey, according to John Sarno, president of the Employers Association of New Jersey, state initiatives are now "essentially dead."

"Big pieces of the health care reform puzzle are coming together under the [Obama] administration," he says.  One of the biggest so far is an extension of COBRA, which was part of the American Recovery and Reinvestment Act.

COBRA allows employees and their dependents to continue their coverage of group health insurance plans in specified situations, such as termination of employment, where the coverage would otherwise end.

As of March 1, 2009, eligible individuals are entitled to a 35% COBRA premium assistance subsidy; meaning the remaining 65% of the premium payment must be covered by the employer or insurer, who then can recoup this payment as a credit against Federal payroll taxes.

"The power has definitely shifted to Washington, D.C." says Sarno. "The modest experiments by the states are basically over.  For one thing, they can't afford it.  Secondly, here in New Jersey, the government's huge deficit has just about overwhelmed every thing else."

While the premium subsidy program is scheduled to phase out at the end of 2009, Sarno believes that without increased hiring, the program will be continued at least for another year. EANJ is following the action closely, he says.