For the average worker who has lost her job since May 31, the cost of COBRA has tripled. (Flickr, Steve Rhodes)

In the first week of July, Andie Davis’ husband, who worked in manufacturing, lost his job, as hundreds of thousands of Michiganders have since the onset of the recession. Soon after, he started collecting unemployment insurance benefits that might last the family of four as long as 99 weeks. Davis hopes that the benefits will keep the family afloat — the mortgage paid, school lunches made, the electricity on — without forcing her to tap into the family’s savings.

[Economy1] But to keep the family financially stable while both she and her husband look for work, she has decided to forgo health insurance. The Davis family looked at how much COBRA would cost them, thinking the government would help pay for it. Had her husband lost his job just six weeks earlier, Washington would have footed about two-thirds of the premium bill. But since Davis’ husband lost his job after May 31, the young couple is on their own.

The change has gone little-noticed, both by the press and by the laid-off persons impacted by it. But a popular stimulus provision, the federal subsidy of COBRA benefits, expired for newly unemployed workers as of the first day of June. That means, for the average worker who has lost her job since May 31, the cost of COBRA has tripled.

COBRA — a provision created in the Consolidated Omnibus Budget Reconciliation Act of 1985 — gives workers the option of buying into their old health-care plan when they lose their job. Before the recession, COBRA let workers who lost their job through no fault of their own pay the entire health-care premium plus a two-percent administrative fee to keep coverage, about $8,800 per year for the average enrollee. (Generally, COBRA lasted 18 months.)  As part of the American Recovery and Reinvestment Act, or the 2009 stimulus, Congress subsidized this coverage, given the massive number and economic hardship of laid-off workers. The subsidy paid for 65 percent of health-care premiums for up to 15 months, meaning an average enrollee paid less than $3,000 a year.

For the Davises, under COBRA, coverage might have been a manageable $400 a month. When Davis looked into enrolling her husband and herself, she found it would cost more than $1,100 a month — leaving the family just a few hundred dollars for the mortgage, utilities, gas and food. She sought information on other private plans, but considered all of them too expensive. For now, the Davises are purchasing barebones coverage that will help pay hospital bills in case they are in an accident.

She rationalizes: “Me and the husband, we’re young enough that we can go without visits to the dentist and the [gynecologist] for a year,” and she argues, “I just do not see how it would be worth paying that much money for coverage, when we’re looking at a lot of other problems.” She argues that if the choice is between routine care and paying the electric bill, she will choose the latter. In the meantime, she is praying that her husband’s asthma does not flare up in the fall and hoping that they find jobs soon.

The Davises are one of hundreds of thousands of families doing the same. According to a study of 200 very large employers by Hewitt Associates, the COBRA provision doubled the proportion of laid-off workers enrolling in the program. In the fall of 2008, before the subsidy, about 19 percent of laid-off employees enrolled in COBRA. During the first six months of the subsidy, 38 percent of laid-off workers chose to. Now, with the subsidy’s end, enrollment rates are plummeting.

“Enrollment rates will likely decline over time as workers can’t, or aren’t willing to, afford the high premiums associated with COBRA coverage,” Hewitt’s Karen Frost said in a statement. “It’s possible these laid off workers are simply seeking coverage with a new employer or through their spouse’s employer. Unfortunately, it’s also likely that some are just foregoing health insurance altogether.” The National Employment Law Project estimates that 144,000 individuals and families per month have lost out on the subsidy.

It wasn’t supposed to be this way, but the extension of the COBRA subsidy became caught up in the tax extenders bill — also known as the jobs bill or H.R. 4213 — a large package of popular stimulus provisions that eventually died at the hands of a Republican filibuster. Senate Democrats managed to move unemployment insurance benefits, but few other portions of the popular bill made it through a Senate allergic to deficit spending.

The COBRA subsidy is highly popular: Hart Research found that 70 percent of Americans support extending it.  And many on the Hill fought to keep it in the tax extenders bill or to push it through other provisions. “Millions of Americans have been hard hit by the recession and lost their jobs through no fault of their own,” Sen. Robert Casey (D-Pa.) argued. “If Congress turns its back on them, they will have an even more difficult time making ends meet. With no premium assistance, COBRA health care benefits would consume 75 percent of the monthly unemployment payment for a Pennsylvania family.”

He offered an amendment to keep the subsidy within the jobs packages, and along with Sen. Sherrod Brown (D-Ohio) has offered it as a standalone bill. The Extend COBRA Premium Assistance Program Act of 2010 provides a six-month subsidy for workers laid off between May 31 and Nov. 30. The provision is entirely deficit-neutral, eliminating a tax break on annuity trusts as a pay-for. (The bill is one of many that would extend COBRA. On the House side, Rep. Susan Davis (D-Calif.), for instance, introduced a bill doing so until relevant portions of Obama’s health care bill come into effect in 2014.)

Casey and Brown’s bill is popular — cosigned by Democratic Senators John Kerry (Mass.), Carl Levin (Mich.),  Sheldon Whitehouse (R.I.), Debbie Stabenow (Mich.), Patrick Leahy (Vt.), Christopher Dodd (Ct.), Al Franken (Minn.), Roland Burris (Il.) and Daniel Akaka (Hi.) and supported by a slew of others. But it is caught in committee, and its likelihood of passage any time soon is small.

That means that the popular provision is likely dead, and for families like the Davises, health care coverage will remain an unaffordable luxury.

1. Raising premiums
There is absolutely, positively no prohibition on companies raising premiums at outrageous rates until 2014 — so they’re not going to stop. And politicians in Washington might scream, but the volume will be far less next year because the President won’t have a reform bill to pass.

2. Kicking people out for pre-existing conditions
The insurance industry may have relented about using pre-existing conditions to determine children’s eligibility, but they’re not about to let adults with pre-existing conditions qualify for insurance coverage one minute sooner than 2014 — and the way they floated the idea that the law didn’t really totally require them to accept children with pre-existing conditions is a hint that they’re desperately looking for a similar loophole in 2014 and beyond.

3. Changing your insurance plan
Remember how President Obama said that if you liked your insurance plan, you wouldn’t have to change? Well, the health reform bill won’t make you, but your insurance company might. They’re busy shutting down and restricting access to managed care plans (HMOs) and pushing current customers into high-deductible plans, where customers have to pay all expenses out of pocket before the insurance company picks up a dime. In other words, customers pay a (relatively) small premium each month and then the first $2,500 of their health care each year before the insurance company begins to cover a percentage of the costs of their medical care.

4. Making life more difficult for doctors
One great way to reduce insurance company payouts is to make it more difficult for doctors to file claims, which insurance companies are already planning on doing.

5. Tightening up internal practices
That’s a euphemism for giving patients and doctors enough of a run-around trying to get bills paid to convince them to give up asking for reimbursements.

6. Marketing only to healthy people
Healthy people are the cheapest to insure, and people tend to gravitate toward marketing materials that look like them. But if they make certain drugs hard (or impossible) to find on pharmaceutical formularies, or put up physical barriers to obtaining the insurance, they can (and likely will) keep more elderly and sick people from even applying for their insurance.

7. Re-label current overhead expenses at health care
When the reform finally takes full effect in 2014, insurance companies will have to spend 80 percent of their premiums on care for their customers. Thus, in order to make more money, they’ll have to increase the money you spend on care, or figure out a way to classify expenses currently deemed “overhead” as “health care for you.” Luckily, they’ve got an army of lawyers and accountants more than willing to assist.

8. Taking full advantage of the unhealthy behavior premium
In the reform, insurers are allowed to makes premiums 50 percent more expensive for consumers who engage in “unhealthy” behaviors, which was intended to allow them to continue charging smokers higher premiums. But there are lots of behaviors deemed “unhealthy.” Have more than one sexual partner? Neglect to get 30 minutes of cardiovascular exercise a day? Love sweets? Drink carbonated, caffeinated sodas? All those behaviors, and many more, are considered risky by the medical profession and could make your insurance far more expensive than you think.

9. Charging old people as much as they can
The law allows insurers to charge people between 55 and 65 (the current age of Medicare eligibility) three times more than people 54 and under. So on their fifty-fifth birthdays, some customers could get new, higher insurance bills that put readjusted mortgage bills to shame — and there won’t be anything remotely illegal about it.

10. Lobbying to make the most of the loopholes that exist and create others
It likely goes without saying that all the money and lobbying time that went into watering down health care reform and trying to keep it from passing aren’t just going to stop flowing to Washington. Rather, as the Department of Health and Human Services spends its time promulgating rules to govern the various reforms in the bill, lobbyists will simply switch their focus from the Hill to HHS. We know what they want — to limit the effect reform will have on their bottom line — and they know how they’ll get it: through the regulatory process.

The Congressional Budget Office stirred yet another hornet’s nest Monday when it released its latest analysis of the costs associated with the Democrats’ health care reform bill, with each side of the debate already leaning on the report to bolster its case. And the reason is simple: There’s something in there for everyone.

For critics of the reform legislation, the CBO found that the premium costs for enrollees in individual, non-group plans would rise between 10 and 13 percent, leaving GOP leaders to pounce on the legislation as failing to control health care costs. “A bill that’s being sold as a way to reduce costs actually drives them up,” Senate Minority Leader Mitch McConnell (R-Ky.) said in a statement.

Yet the CBO also found that the insurance subsidies proposed under the bill would reduce the costs for nearly 60 percent of those enrollees to “well below the premiums that would be charged for such policies under current law.” That is, although the premium costs might rise, the financial burden on most patients would fall. Not surprisingly, Democrats are focusing on these savings in their own reaction to the findings.

The CBO report, Senate Majority Leader Harry Reid (D-Nev.) said in a statement, “strengthens our belief that the Senate reform proposal will bring security and stability to American families and will stem the tide of rising premiums.”

Of course there’s nothing new about the two parties disagreeing over a piece of legislation, nor is it rare to see lawmakers cherry-picking from reports to present their side in the brightest light. If there’s any message here, it’s that the health reform debate, like so many on Capitol Hill, is full of nuance, allowing every bit of new analysis to be spun in wildly different directions.

That being said, the new CBO report makes it clear that the central question of this debate remains unchanged: Should higher-income Americans shoulder some of the burden of allowing their lower-income peers to buy comprehensive health insurance? On that one, the sides have largely solidified an agreement to disagree.

* For family health coverage provided through the workplace in North Carolina, the average annual health insurance premium (employer and worker share of premiums combined) in the 2000-2009 period rose from $6,649 to $13,083—an increase of $6,434, or 96.8 percent.

* Between 2000 and 2009, the median earnings of North Carolina’s workers rose from $23,080 to $27,330—an increase of $4,250, or 18.4 percent.

The trend in North Carolina is hardly an anomaly. In Virginia, insurance premiums have jumped 3.4 times faster than income over the same span, Families USA reveals in a similar report also released Tuesday. The findings:

* For family health coverage provided through the workplace in Virginia, the average annual health insurance premium (employer and worker share of premiums combined) in the 2000-2009 period rose from $6,684 to $12,687—an increase of $6,003, or 89.8 percent.

* Between 2000 and 2009, the median earnings of Virginia’s workers rose from $26,459 to $33,527—an increase of $7,068, or 26.7 percent.

The report is likely to fuel the calls for the creation of a non-profit, government-backed health insurance plan to compete with the private companies responsible for the trends Families USA is reporting — companies that have legal responsibilities to shareholders, but no responsibilities to ensure that patients get the care they need. If recent insurer profit reports are any indication, there’s plenty of room for such a non-profit to offer much lower premiums.

Imagine how the Federal Deposit Insurance Corporation must feel these days. The same agency that now says it needs to borrow $500 billion in emergency funds to take over failed banks collected no insurance premiums from most banks for nearly an entire decade, The Boston Globe reports.

The practice lasted from 1996 to 2006, according to The Globe.

The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized – and that bank failures were so infrequent – that there was no need to collect the premiums for a decade, according to banking officials and analysts.

Now with 25 banks having failed last year, 17 so far this year, and many more expected in the coming months, the FDIC has proposed large new premiums for banks at the very time when many can least afford to pay. The agency collected $3 billion in the fees last year and has proposed collecting up to $27 billion this year, prompting an outcry from some banks that say it will force them to raise consumer fees and curtail lending.

This practice doesn’t look too smart these days, now does it? Here’s how FDIC Chairman Sheila Bair explains what happened:

Last week, Bair wrote to Senate Banking Committee chairman Christopher Dodd, a Connecticut Democrat, that her agency could need more money because the existing fund “provides a thin margin of error” given the government’s responsibility “to cover unforeseen losses.” The March 5 letter, provided to the Globe, said the additional borrowing authority is necessary to “leave no doubt” that the FDIC can “fulfill the government’s commitment to protect insured depositors against loss.”

Bair said yesterday that the agency’s failure to collect premiums from most banks “was surprising to me and of concern.” As a Treasury Department official in 2001, she said, she testified on Capitol Hill about the need to impose the fees, but nothing happened. Congress did not grant the authority for the fees until 2006, just weeks before Bair took over the FDIC. She then used that authority to impose the fees over the objections of some within the banking industry.

“That is five years of very healthy good times in banking that could have been used to build up the reserve,” Bair, a former professor at the University of Massachusetts at Amherst, said in an interview. “That is how we find ourselves where we are today. An important lesson going forward is we need to be building up these funds in good times so you can draw down upon them in bad times.”

Yes, a very “important lesson.” Although, I think it’s a bit of an understatement, considering the FDIC — whose primary mission is to provide insurance for bank deposits — failed to, you know, collect insurance premiums from the banks it insures. Oh, well. Live and learn.

And we should probably hope that not too many more banks need to be taken over by the FDIC.

(Via Balloon Juice)