Congressional Democrats are pushing to subsidize COBRA benefits as part of a fourth pandemic relief bill. Three former White House economists say that would be bad policy.
“Subsidizing COBRA policies would further weaken the economic recovery,” write Casey Mulligan, Brian Blase, and Doug Badger for the conservative Galen Institute, a healthcare policy nonprofit organization. Mulligan served on the Council of Economic Advisers, and Blase served on the National Economic Council during the Trump administration. Badger served on the National Economic Council during the George W. Bush administration.
Under the Consolidated Omnibus Budget Reconciliation Act of 1985, employees who lose their jobs can continue to receive health insurance from their employers for up to 18 months. However, the employees have to pay for the entire insurance premium out of their own pockets. Democrats want to subsidize 100% of the cost of COBRA for workers out of a job during the pandemic.
Mulligan, Blase, and Badger claim that Congress has already hampered a recovery by increasing unemployment benefits through August. In some cases, those benefits exceed what their jobs pay them. Subsidizing COBRA would only worsen the situation, they argue.
“Many businesses have reported this is making it extremely difficult, if not impossible, for them to re-open,” they write. “Providing a COBRA subsidy would further weaken workers’ incentive to return to work and would likely spur a new round of layoffs as employers could lay off workers without worrying they would lose their health insurance coverage.”
They further state that “a COBRA subsidy represents corporate welfare since the premium payments would go directly to health insurance companies. This seems particularly ill-timed since insurance companies already are benefiting financially from the mass cancellation of elective health procedures.”
Bobby Scott of Virginia, the Democratic chairman of the House Committee on Education and Labor and a sponsor of the bill, told Vox that COBRA premiums “can be easily $1,000 a month, and if you just lost your job, you don’t have $1,000 a month.”
A report from the liberal Economic Policy estimated that as many as 3.5 million people were at high risk of losing their health insurance in April. During the Great Recession of 2008, Democrats in Congress and the Obama administration passed legislation that subsidized 65% of COBRA benefits.
