Jeff Goldsmith on COBRA's Bite!

My mom always warned me that if you keep on playing with snakes, eventually they bite you.  One of the thoughtful countercyclical ideas in last year’s Stimulus Bill was subsidizing up to 2/3 of the cost of  COBRA coverage (e.g. continuation of their group health insurance) to workers who lost their jobs in the recession.  Prior to ARRA, only 19% of workers elected to continue coverage ( no income to pay the premiums might have played some role). As a result of the ARRA subsidies, the number electing continued health coverage doubled, to almost 40%.

However, according to Carl McDonald, Oppenheimer and Co’s ace health plan analyst, the price paid was that health plans are experiencing COBRA loss ratios (the ratio of claims paid to premium) of between 150-200%!  Why?  Well, those who expected medical expenses enrolled and those who expected to be healthy didn’t.   A rehearsal for what happens if Congress decides to mandate guaranteed issue/no pre-existing conditions without requiring that people buy insurance.  Who pays for the huge COBRA losses?  The rest of us insured people…

Was that a snake in my Christmas stocking, or just a thoughtful idea everyone likes coming back to bite us?  Before Congress plays Santa with health coverage, they need to do a little homework.