Health insurance has a become a big issue as more and more people are laid off due to the financial crisis, their options being either seeking new individual health insurance or using the COBRA plan, which was created especially for laid-off workers.
The problem with COBRA is that it is largely unaffordable, taking up more than three-quarters of a worker's government unemployment compensation. Currently, the unemployment rate is 7.2%, which is the highest the US has seen in 16 years. This means that millions and millions of people are jobless, thus looking for health insurance. A laid off worker with health problems is very unlikely to find individual health insurance, as companies are afraid to cover them.
The situation in Hawaii is even worse, even though the COBRA plan is the cheapest in Hawaii, most of the unemployed people can’t afford paying for health insurance. This is very hard, as one is constantly thinking and wondering what is to do if he gets seriously sick.
The large majority of Americans get their health insurance from their work place, those who are jobless are thus in a big predicament. About 46 million people have no health insurance and the rest are covered by government insurance. Surveys show about 18 to 26 percent of people eligible for COBRA use the program in any given year, meaning that a low percentage of the people without a job live without a health insurance.
The health care system needs to be reformed, one way or another, and this should be the number one priority.
(CBS) When people lose their jobs, they also lose their health insurance. Finding alternative insurance can be intimidating, and expensive. But in this column, Early Show financial adviser Ray Martin goes through some of the available options.
For starters, he says, do NOT go without insurance, assuming it's going to be prohibitively expensive. The No. 1 reason individuals file for bankruptcy is medical bills that can't be paid thanks to a lack of insurance. But, he stresses, you do have some choices.
According to recent statistics, about 46 million Americans are going without health insurance coverage. With the souring economy and rising unemployment, the number of folks losing job-related health insurance benefits is set to rise significantly. And with more folks looking for jobs, finding a job will take longer, which means more displaced workers can go without health insurance for longer periods of time.
Unfortunately, there is no universal health insurance plan for folks who need temporary health insurance coverage due to loss of coverage when they are between jobs or no longer qualify as a dependent under a spouses or parents plan. However, many insurance companies are developing more individual and "gap" plans in an effort to make some options more affordable to individuals, due to a growing market demand. Sorting through the available options and finding affordable short-term health insurance can be challenging, but it's not impossible.
Here's what to look for:
COBRA Continuation of Coverage
Under a Federal law called COBRA (Consolidated Omnibus Budget Reconciliation Act), displaced workers are provided the right to continue coverage under their employers' group plans after they change or lose jobs. Continuation of coverage can also apply to children who no longer qualify as covered dependents because they are no longer full-time students. This option is available to employees of companies with group health plans that cover 20 or more workers. Some employers with other health plans (such as self-insured plans) may not be required to provide COBRA continuation coverage. The cost of health coverage under COBRA for displaced workers is usually more expensive than health coverage for active employees, since, usually, the employer pays a part of the premium for active employees, while displaced workers are required to pay the entire premium themselves. Since it is the full cost for the coverage, it can be expensive: On average, the monthly premium for an individual policy in 2008 was $392, and for a family plan, about $1,056 a month, according to a recent Kaiser/HRET survey. But typically, that is still less expensive than individual health coverage with the same features and benefits.
Coverage under COBRA can be continued for up to 18 months, and up to 36 months when loss of coverage is due to divorce, disability, etc. When electing COBRA coverage, you must be sure to do so within 60 days of your “qualifying event” (such as loss of your job, divorce, etc.); after that time, the insurance company can decline your eligibility. Once you select COBRA, your coverage is effective with no gaps, so your eligible medical claims during that period of time should all be covered. Because this is the same coverage that the worker had before losing his or her job, the same benefits and features are available, and there are typically no restrictions for preexisting conditions. You can also discontinue participating at any time after permanent coverage is found.
But continuation of health insurance under COBRA is not always available for workers of companies that go out of business: When a company shuts its doors and also terminates its health insurance plan, usually there is no COBRA coverage available. If, however, there is another plan offered by the company, you may be covered under that plan.
Short-Term Medical Insurance
Short-term medical insurance can provide coverage for a limited period of time, and may be a good solution for those between jobs or waiting for other health insurance to start. This form of coverage is offered by a select group of insurance companies and features coverage from one-to-12 months. This can be a good option for those between jobs, when COBRA is not available and you do not have significant pre-existing conditions. For example, the Celtic Insurance Company offers a short-term medical plan for a 45 year-old male that can cost as little as $74 a month. Of course, the cost of this coverage will depend on your age, other health related factors, and the deductible you select (some products feature a selection of deductibles from $250 to $2,500). After the deductible is paid, covered individuals typically pay 20 percent of covered expenses up to an out-of-pocket limit, and then all covered expenses are covered 100 percent up to $2 million. Another provider that offers short-term medical insurance is Golden Rule (a UnitedHealthOne Company). Also, check out www.ehealthcobra.com, a Web site developed by eHealthInsurance that offers quotes and side-by-side comparisons of several short-term and high-deductible medical plans for individuals and families.
Catastrophic Health Insurance
As the name implies, these policies are primarily designed to cover major emergency medical expenses. The cost is relatively low, because insured people must first satisfy a high deductible, ranging from $500 up to $15,000, depending on the plan purchased. These policies are not intended to pay for routine doctor office visits or trips to the emergency room for the flu, nor for preventative care, maternity care or mental health care. However, most catastrophic plans cover hospital stays, X-rays, and surgical expenses. Think of this as affordable medical coverage for the worst that can happen, which primarily provides coverage so your other assets do not get wiped out from the high cost of a true medical emergency. Folks who get this coverage will need to be prepared to pay a deductible if they incur a serious illness or accident. If you have a pre-existing condition such as heart disease, cancer or diabetes, you are generally not eligible for this type of coverage. There are several Web sites that will compare catastrophic plans in your area and provide quotes for you, including gohealthinsurance.com and medhealthinsurance.com.
Association Coverage
Many trade, professional or other associations offer health insurance to their members. If you belong to any groups or associations, call their membership services to find out if they offer this coverage. There can occasionally be a small, additional administrative fee such as two percent of the annual premium that the Association may charge you, but this is still a good way to obtain a group rate for coverage.
Non-Group Coverage
Many health insurance companies offer individual health insurance coverage. This can be very expensive and may not available in your state. Often, application requirements will apply, and preexisting conditions will be excluded from covered health and medical conditions. Some states mandate a “high-risk pool” that guarantees by law that they accept those who apply, under certain conditions. Check with your state's insurance department for more information.
Local Clinics
Some uninsured adults turn to local clinics for low-cost or free medical care for things such as routine visits or check-ups. But this is not a viable alternative for a major illness or accident, as hospitalization is not provided. If you decide to forgo health insurance, it does not mean that you can't still seek care from your family physician or local doctors; you will just need to pay as you go. And don't be afraid to negotiate those fees. This is a much more affordable way to seek care then going to an emergency room, where the cost can be more than 10 times higher.
Medicaid
This is a joint federal-state health insurance program for individuals who meet near poverty-level income and asset qualifications. States usually provide Medicaid for individuals who receive federally-funded cash assistance payments, such as SSI. The set poverty-levels can vary by state so, for more information about Medicaid, contact your state's Medicaid agency, social service or welfare office.
WASHINGTON -(Dow Jones)- Hartford Financial Services Group (HIG) and Lincoln National Corp. (LNC) were granted thrift charters Friday, clearing a hurdle for their insurance affiliates to receive capital infusions under the Troubled Asset Relief Program.
Hartford Financial has a number of life-insurance affiliates, while Lincoln National is the parent of Lincoln National Life Insurance Co.
The Office of Thrift Supervision announced the approval of the thrift charters for Hartford and Lincoln on its Web site.
The life-insurance industry has been lobbying to receive federal rescue aid under TARP, as insurers' investment portfolios have been badly battered by the financial turmoil.
The Treasury told the industry that only companies with a federal regulator are eligible for the program. Some insurers, such as MetLife (MET), have long held thrift charters. The industry, however, is almost exclusively regulated at the state level.
ALBANY — Gov. David A. Paterson will propose that private employers be required to offer health insurance to workers’ dependents who are ages 19 to 29, part of what the administration hopes will be a step toward universal health care coverage in New York. Mr. Paterson plans to call for the legislation during his State of the State address on Wednesday afternoon.
“This year, we will take another important step as we move toward increasing access to coverage for all New Yorkers,” Mr. Paterson said in a written statement on Tuesday.
Currently, employers are not required to offer health insurance to dependents who are older than 18 or, if they are in college, 22.
The proposal would amount to a wide expansion of coverage to some 800,000 people 19 to 29 years old who are uninsured. And it ties into a continuing initiative by Mr. Paterson, who is asking the State Legislature to approve deep cuts in spending this year, to enhance the kinds of social safety nets that are overwhelmed during an economic downturn.
According to the governor’s office, 31 percent of New York’s uninsured are ages 19 to 29. Many of them lose coverage once they graduate from college and remain uninsured until they are able to find a job that offers health insurance. But as the job market worsens, the state anticipates that the issue will become more pressing, with more and more young people unemployed and uninsured.
If the Legislature approves the proposal, the state expects that about 10 percent, or 80,000 people, will take advantage of it.
Paterson administration officials said that the plan would not cost the state or businesses anything. The only cost would be to families that chose to pay for the expanded coverage.
Kenneth Adams, president of the Business Council of New York State, a group that represents businesses across New York and was briefed on the plan by the governor’s advisers, called the proposal “compelling” and said that it would be especially critical given the economic climate.
“Out of the gate, a program that gets 80,000 New Yorkers health insurance is a good thing,” Mr. Adams said. “Considering where the economy is right now, and that by definition this is a tough period for this age group to obtain insurance, it is a very important issue.”
Mr. Paterson’s legislation would round out proposals to expand access to health care that he laid out in his budget for the 2009-10 fiscal year, which begins on April 1.
One proposal would simplify the application process for public health insurance programs by eliminating the requirement for face-to-face interviews, among other things. Another proposal would expand eligibility for the state’s Family Health Plus insurance program, which covers people who exceed the limits for Medicaid eligibility.
The New York Times reported on the front page of its Sunday edition that as part of the planned stimulus program, Obama Considers Major Expansion in Aid to Jobless. If the article is true, it is a very bad sign for both the economy and the culture:
One proposal, as described by Democratic advisers, would extend unemployment compensation to part-time workers, an idea that Congressional Republicans have blocked in the past.
Other policy changes would subsidize employers’ expenses for temporarily continuing health insurance coverage to laid-off and retired workers and their dependents, as mandated under a 22-year-old federal law known as Cobra, and allow workers who lose jobs that did not come with insurance benefits to be eligible, for the first time, to apply for Medicaid coverage.
As far as the economy goes, the plan as discussed basically involves paying more people in both cash and benefits to stay unemployed. This is just about the worst possible approach to reinvigorating the economy.
A major recession will require many people to make real adjustments and do difficult things. They will have to relocate to different states, change careers, accept significantly lower pay while they gain experience in their new careers, work short-term at unrewarding jobs while they go to night school to train for better careers, etc.
In the long run, this Schumpeterian process of creative destruction will benefit both the individual and the economy at large. The individual winds up working in a new, more rapidly growing and thus a more opportunity-filled industry while the country sees its resources--in this case labor resources--reallocated to places and careers where they can do the most good.
In the short term, though, this type of transition wreaks havoc on families and individuals--that is why it is called creative destruction. This means that few people will undertake such changes except under extreme necessity. Anything the government does to reduce that necessity--such as paying benefits and giving health insurance--creates a reason for a waitress in Michigan to stay put and hope things get better when the real opportunity for her may be to move to Arizona and work in the elder-care industry.
Beyond economics, extending these types of benefits is extremely corrosive to the culture. As a small business owner, I can’t tell you how many people over the years have approached me looking for work “off the books” because they were receiving unemployment benefits and didn’t want to lose them. These job applicants perceived getting a job as carrying an enormous tax equal to 100% of the unemployment benefits. Add in normal income and payroll taxes plus the cost of commuting and they saw a job as not worth it. These types of benefits tempt otherwise law-abiding citizens to engage in illegal activities.
Traditional unemployment benefits have already been extended by 13 weeks in states with an unemployment rate of at least 6 percent. This will delay the recovery. To add subsidized health insurance and Medicaid for those who never had health insurance plus give money to former part-timers … this is all a way of slowing necessary changes in the economy.
One can appreciate the need to increase aggregate demand; one can empathize with the desire to help unemployed people, but if the goal is a speedy recovery without undermining law-abiding practices, the rule should be simple: Minimize or avoid situations in which we pay people for staying unemployed.
Government insurance programs that safeguard bank deposits should be reformed to ease taxpayers’ undue stake in propping up the nation’s banking system, according to research by a University of Illinois finance professor. George Pennacchi says the Federal Deposit Insurance Corp., created during the Great Depression to halt bank runs, is supposed to protect savings through premiums paid by banks, but is effectively subsidized by the U.S. Treasury, putting tax dollars at too much risk.
“We have a system where when things get bad, taxpayers end up being forced to pay for bank failures, not just the FDIC,” Pennacchi said.
Proof that deposit insurance has grown overly generous has surfaced amid a global economic meltdown, he said, with investment firms such as Goldman Sachs and insurance giant Hartford Financial becoming banks to get access to insured deposits.
“One of the reasons why that’s so, and I think this has been a long-standing problem, is that government has tended to subsidize deposit insurance, sort of through a back door,” Pennacchi said. “The savings and loan crisis is an example. Instead of premiums paid by thrifts covering the losses, about $124 billion came from taxpayers.”
He proposes reforms in a research paper that will be presented this month at an economic conference sponsored by the American Enterprise Institute, a conservative-leaning, Washington-based think tank that seeks to influence public policy.
One reform, Pennacchi said, is veering away from an approach that provides nearly unlimited government financial backing when large institutions such as Bear Sterns are on the brink of failure. The government, he says, deems some banks “too big to fail,” with so many connections to other financial markets that failure could net a disastrous domino effect.
But he says the problem can be addressed without leaving taxpayers on the hook. He proposes a central clearinghouse requiring banks to put up collateral in derivative trading that would cover potential losses if one of the parties fails.
“That would get rid of the too-big-to-fail problem and is done all the time with exchange-traded derivatives,” Pennacchi said. “If you trade on the Chicago Mercantile Exchange, there’s a clearinghouse that requires both parties to put up collateral, so if one of them fails it doesn’t cause a loss for their trading partners.”
He says the FDIC should also reform premiums for deposit insurance that have historically been artificially low, covering only average losses and heightening risks of a taxpayer bailout in the event of widespread bank failures.
A move toward rates charged for similar, private-market insurance, such as credit-default swaps, would likely yield significant premium increases, roughly doubling current rates, Pennacchi said.
“But I think that’s the minimum that needs to be charged to protect taxpayers and prevent the government safety net from expanding even more,” he said.
Pennacchi also advocates either abandoning a dedicated deposit insurance fund, managing the program through the treasury instead, or creating a swap market that would level out banks’ premiums.
He says banks could lock in deposit insurance costs through a premium swap market, rather than paying higher premiums when bank failures rise and receiving rebates on premiums when failures are low. The swap market would be similar to interest rate swaps, transferring risk to investors outside of the banking industry.
“If there’s any reform that would be easy to do it would be to create this premium swap, which would lead to more stability for banks because they wouldn’t face high premiums in bad years when they’re least able to pay,” Pennacchi said.
His research will appear in a book that will be published this year by the American Enterprise Institute. The book will focus on government guarantee programs ranging from the FDIC to crop and terrorism insurance.
President-elect Barack Obama and congressional Democrats are working on a plan that would deliver $300 billion worth of tax cuts to individuals and businesses, according to the Wall Street Journal.
The proposed tax cuts, which would make up about 40 percent of the economic stimulus package, may make it easier to attract Republican support for an economic-stimulus package, as many Republicans have said that economic initiatives should rely more heavily on tax cuts rather than spending, according to the Wall Street Journal.
The size of the proposed tax cuts could reach $775 billion over two years, which is a larger amount than many Democrats and Republicans in Congress had anticipated, according to the Wall Street Journal.
If enacted, the Obama tax-cut proposals could total more in two years than either of President Bush's tax cuts did in their first two years, according to the Associated Press.
Bush's 10-year, $1.35 trillion tax cut of 2001 - considered the largest tax cut - was made up of $174 billion of cuts during its first two full years, according to Congress's Joint Committee on Taxation.
Obama had hoped to have Congress enact the recovery plan in time for him to sign his when he takes office in January, but Robert Gibbs, spokesman for Obama, said that was "very, very unlikely."
"We don't anticipate that Congress will have passed, both houses, an economic recovery agreement by the time the inauguration takes place," Gibbs told the Associated Press.
Obama has insisted bold and quick action is crucial to help America bounce back from this recession.
"Economists from across the political spectrum agree that if we don't act swiftly and boldly, we could see a much deeper economic downturn that could lead to double-digit unemployment and the American dream slipping further and further out of reach," he said in his Saturday radio and YouTube address.
Congressional aides briefed on the plan say it likely will include tax cuts of $500 to $1,000 for middle-class individuals and couples, as well as some $200 billion to help revenue-starved states pay for health care programs for the poor and other operating costs. A large portion of the money would go for infrastructure projects, such as road and bridge repairs as well as energy efficiency projects and health care information technology systems.
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