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Don’t let private health insurance be a coronavirus victim

Updated: Sep 17, 2020

By: Ryan Ellis

No one will know until final reports are in, but our best guess at the moment is that about 36 million people have lost their jobs due to the COVID-19 pandemic shutdown. For many of these newly unemployed, the transition not only means the loss of a paycheck, but it also means losing workplace health insurance benefits.

What happens to your insurance plan when you lose your job? It’s not generally well known, but you can keep your old plan for up to a year and a half under a program called COBRA. This requires the former employee paying the insurance company 102% of the full monthly premium (the extra 2 percentage points are for administrative overhead), so taking COBRA is not a cheap option. However, staying on COBRA means not losing deductible accumulation in your plan, not having to worry about what doctors and hospitals are covered, etc.

There are other choices besides COBRA and becoming uninsured, of course. If eligible, an unemployed person could apply for the state’s Medicaid benefit. Still others might look at what, if any, options they have in their state to enroll in Obamacare. But these are each suboptimal solutions for conservatives. Do we really want the ranks of those on socialized medicine to swell by tens of millions and probably staying that way long after the pandemic has passed?

In an ideal world, Congress would give unemployed workers unrestricted healthcare vouchers to purchase whatever health coverage they would like, be it COBRA, a short-term plan, a health-sharing ministry, etc. Brian Blase, formerly a special assistant to President Trump at the National Economic Council, laid out this option very well in a recent op-ed.

The problem with this approach is not that it’s incorrect, it’s that it’s impractical. There is no way a House of Representatives under the control of Speaker Nancy Pelosi would support a voucher program like the one Blase envisions. Nor would such a program get past Senate Minority Leader Chuck Schumer’s power to withhold cloture. That idea might fly under a unified Republican Congress, but we simply don’t have that.

Failure to do anything, moreover, is not costless. Taking no action whatsoever probably means that millions of people will choose to leave behind their old workplace health insurance plans and enroll in either the rock of Obamacare or the hard place of Medicaid.

Conservatives don’t think employer-provided health insurance is the best way to cover people. We prefer insurance purchased by individuals apart from where they may or may not work. But I think it’s safe to say that when given the choice, conservatives prefer a private sector employer plan over a socialized medicine insurance plan derived from an Obamacare exchange or a state Medicaid program.

One proposed solution that avoids swelling the rolls of government health insurance and actually stands a chance of getting through a Democratic House is for taxpayers to pick up most of the cost of COBRA premiums for the recently uninsured. As someone who has worked for decades in conservative free market healthcare fights, often against Big Insurance, I never thought I would write that last sentence. But the pandemic has cast us into a place of bad and worse choices. Just like conservatives learned to embrace the Paycheck Protection Program, which is taxpayers paying the wages of small-business employees, they ought to do the same with a COBRA premium subsidy — each is about maintaining the link between employer and employee.

No matter their many defects, workplace healthcare plans are at least private sector offerings. Keeping people out of the government healthcare space is the “do no harm” imperative of the moment. Doing nothing, or holding out for an unrealistic better alternative, is to sit back and watch millions of people move into government insurance, probably forever.

COBRA subsidization has been done before. In 2009, responding to the housing crash and the financial crisis, Congress passed a bill paying for 65% of COBRA premiums. That’s probably a floor this time, as the remaining 37% picked up by an unemployed worker is still a lot of money. The average monthly cost of employer-provided health insurance was about $1,700 per month for families and $600 for singles last year, so the COBRA subsidy might have to be substantially higher than in 2009.

Some liberals don’t like COBRA subsidies, either. Drew Altman from the Kaiser Family Foundation, writing on Axios, pitched an expansion of Medicare to allow anyone age 50 or older to buy in. Sen. Bernie Sanders has torn apart the COBRA subsidy concept since it’s a competitor to his Medicare for All scheme.

Fiscal conservatives face a simple choice: We can sit back and watch tens of millions of people transition from private sector health insurance to government sector health insurance, or we can use the same impulse we used in promoting the Paycheck Protection Program’s subsidy of payrolls. The right choice is to make sure the private sector health plans are still there after the economy opens back up.

Ryan Ellis (@RyanLEllis) is president of the Center for a Free Economy.

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