By Brian Blase
In the era of coronavirus bailouts, every group is staking a claim. Shuttered businesses and idled workers have understandable needs, and Congress has already provided them significant support. While hospitals received a large fund, now health insurers, with their lobbyists out in full force, are demanding a piece of the action.
COBRA allows workers to remain on their former employer’s plan. Most workers turn it down because they must pay the full premiums themselves, averaging $600 a month for single coverage and $1,700 a month for family coverage.
Policymakers need to confront two issues as they proceed. The first is the appropriate amount of aid per person. The second is the best form of that aid.
The CARES Act, enacted on March 27, gave a weekly federal bonus of $600 for the unemployed through July, raising their total weekly check to roughly $1,000. This boosts the income for many, if not most, displaced workers compared to their previous earnings. While benefitting the former workers, it does reduce the incentive to work.
Fortunately, the current assistance is in cash, allowing displaced workers to best meet their individual needs. By giving cash rather than aid with strings attached, like direct food, housing, or health-care assistance, Congress ensured people could use the generous payments on their priorities.
While health insurance is a concern for Americans, its current value is lower since Medicaid is paying for coronavirus tests for the uninsured, and the Trump administration is using a portion of the $175 billion hospital fund to cover coronavirus treatments for the uninsured.
As with anything else, people are best off when free to choose what health coverage works best for them. Many displaced workers will be able to use a portion of their unemployment benefit to remain on their employers’ plan through COBRA — an advantage because their deductibles and networks remain the same. Short-term plans expanded by the Trump administration, which can be obtained for as little as 3 percent of the weekly unemployment benefit in states where they are available, will offer the best value for many people looking for temporary coverage.
Unfortunately, evidence is mounting that the unemployment benefit makes it difficult for businesses to re-employ their workers. Adding a COBRA subsidy or additional unemployment benefits will further diminish the incentive to work and delay the recovery.
Subsidizing COBRA — as well as other ideas like increasing ObamaCare subsidies — is also bad policy because it pigeonholes peoples’ choices. Assume the monthly COBRA premium is $700 but someone is only willing to pay $400 for a healthcare plan. This wastes $300 of the subsidy. It would make more sense for the government to give a person $700 and let them decide the best use of that money.
Under a COBRA subsidy, big insurers reap the benefit as people only get the money if they spend it on their product.
If Congress wants to prioritize health care, the best option is to expand health savings accounts like Sen. Ted Cruz has proposed, and direct subsidies into them. This allows people the widest freedom to purchase the care best for themselves. If Congress insists that people have health insurance, it should provide a flat amount and let people select the plan and not target subsidies for only politically favored, and generally expensive, coverage. If Congress instead provides COBRA or ObamaCare subsidies, it’s clear that this aid is not about helping people, but about benefitting insurance companies.