The narrow health care provisions in the Trade Adjustment
Assistance (TAA) bill will leave many unemployed workers and their
families without private health care coverage. The bill's
legislative language restricts displaced workers' access to
affordable private coverage by limiting its assistance to highly
expensive COBRA coverage authorized under the Consolidated Budget
Reconciliation Act of 1986, thereby excluding many workers from
receiving any assistance for private coverage at all.
This "COBRA-only" policy is unfair. Instead, Congress can ensure
that all displaced workers are eligible for assistance and are able
to obtain the private health care coverage of their choice. Such a
proposal was passed twice by the House of Representatives during
the economic stimulus debate, was endorsed by the President, and
attracted bipartisan support in the Senate, but Majority Leader
Thomas Daschle (D-SD) blocked any consideration by the Senate.
Why COBRA-Only Falls Short.
In order to cope with job loss following the September 11
terrorist attacks and the recession, some Senators proposed
extending federal health care assistance to those displaced workers
who could maintain their health care coverage under the terms of
the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA).
COBRA allows unemployed workers to keep their employer-sponsored
coverage provided they pay the full premium and a small
administrative fee. It applies only to those firms with 20 or more
workers and lasts for just 18 months.
This narrowly designed proposal failed to attract broad
congressional support during the economic stimulus debate. It has
now reemerged as a provision of S. 1209, the Trade Adjustment
Assistance for Workers, Farmers, Communities and Firms Act of 2001.
S. 1209 would extend the same COBRA-only assistance to workers who
lost their jobs due to increased international trade
There are several compelling reasons why a health policy based
exclusively on a continuation of COBRA alone for private health
care coverage would not be an effective solution for many displaced
COBRA-only coverage does not cover all workers. A Commonwealth Fund
2001 Health Insurance Survey found that one-third of working adults
would be ineligible for COBRA if they became unemployed. Over half
of these adults were ineligible because they either work for a
small employer or simply did not have coverage. In another 2001
report, the Urban Institute estimated that in 1999, 43 percent of
workers and their adult dependents were potentially ineligible for
For the unfortunate workers ineligible for COBRA, the solution for
many on the Left is to enroll them in Medicaid. The problem, of
course, is that Medicaid is a low-quality health care system that
promises more than it delivers. The financially troubled Medicaid
program not only is unprepared to absorb more enrollees, but also
is having difficulty meeting the current needs of the poor and
indigent who depend on it.
COBRA-only coverage does little for low- and middle-income
families. The Urban Institute's analysis of COBRA found that 68
percent of low-income workers and their dependents would be
ineligible for COBRA and 45 percent of all moderate-income workers
would be ineligible. The Commonwealth Fund survey noted that
Hispanic workers in particular were least likely to be eligible for
COBRA coverage. Thus, COBRA-only assistance would benefit mostly
persons who came from high-income families while leaving many low-
and middle-income families, who need the most help, with no viable
a subsidy, COBRA coverage is expensive for workers with no income.
Many COBRA-qualified displaced workers, who now must depend on
their limited and scarce financial resources, may find COBRA
coverage, even with the subsidy, too difficult to maintain. The
reason: COBRA coverage is very expensive. The average annual cost
of an employer-sponsored plan is almost $3,000 for an individual
and $7,000 for a family, according to the Kaiser Family Foundation
and Health Research and Educational Trust 2001 Employer Health
Benefits Annual Survey. The Department of Labor estimates that the
average unemployment benefit for a worker is $925 per month. A
single mother who lost her job and is struggling to pay her rent
and feed her children may simply be unable to find an extra $147 a
month for COBRA coverage.
Unemployed, displaced workers would be forced to stay with coverage
controlled by their former employer. During spells of unemployment,
the linkage between employment and health insurance is, for all
practical purposes, often broken. If former employees want to
maintain their health care coverage through COBRA, the employer who
terminated them still controls their coverage. In some cases, this
is clearly undesirable. Former Enron employees, for example, might
not trust Enron executives to make health care decisions on behalf
of their family as they did for their retirement.
How to Extend Assistance to All Displaced Workers.
A sound health care policy would be both generous and inclusive.
First, all displaced workers, not just COBRA-eligible workers,
should be able to maintain private health care coverage. Second,
all displaced workers should be able to choose plans based on their
assessment of their own medical and financial situation. Nobody
else is better suited to make such decisions for themselves and
Instead of restricting eligibility and eliminating or narrowing
coverage choices, as is done in S. 1209, Congress should guarantee
that all displaced workers are able to obtain affordable private
health coverage of their own choosing. To accomplish this, Congress
Congress has yet another opportunity to help the unemployed and
prevent displaced workers from joining or remaining in the ranks of
the uninsured, but it must do this the right way by reaching out to
families who need assistance the most. It can provide these
displaced workers with generous assistance that will enable them to
secure affordable, private health care coverage for themselves and
their families. This could be a first step in creating an insurance
system for workers that is truly portable, regardless of their job
or job status, and that enables workers to maintain coverage for
themselves and their families throughout their lives.
Owcharenko is Health Care Policy Analyst at The Heritage