Hospital lobbyists are banding with insurers and employer groups to ask Congress to hike subsidies for coverage under the Consolidated Omnibus Budget Reconciliation Act—commonly known as COBRA—for employees who have recently lost their healthcare coverage. Having more people retain private health insurance coverage is good for hospitals' payer mix. But the COVID-19 pandemic could make the subsidies even more impactful for hospitals as they are in the unusual position of having to furlough or lay off their employees.
"If the government is interested in helping hospitals, as they are, this program would be a means of underwriting and supporting hospitals," said Steve Rasnick, board member of the Health Care Administrators Association and the president of Self Insured Plans, LLC.
COBRA coverage is available to employees who have lost their health insurance because they have been laid off or had their hours cut, though employees have to pay both their share and the employer share of the cost. If employees don't choose COBRA coverage, they could buy insurance on the Affordable Care Act exchanges. But there's also a chance they end up with a less comprehensive plan, in Medicaid or uninsured.
House Democrats' proposal to help workers afford COBRA coverage is authored by Education and Labor Committee Chair Bobby Scott (D-Va.). The provision in the Health and Economic Recovery Omnibus Emergency Solutions Act would provide a 100% subsidy for up to nine months for terminated employees, and a subsidy to pay a furloughed employee's share of their premium.
Hospitals and health systems have furloughed employees as operating rooms sit empty, but many have continued to pay their share of health insurance premiums in hopes of bringing staff back when revenues rebound.
"From labor's perspective in dealings with employers, there are certain highly skilled workers that employers want to keep close. They have recruitment costs that they don't want to face on the other side of this," said AFL-CIO healthcare lobbyist Tom Leibfried.
While furloughed workers wouldn't have to pay their share premiums under House Democrats' bill, sources following the legislation cautioned that offering a substantial subsidy could incentivize employers to cut off health benefits to save money.
"If an employer, a hospital or another private employer, has an opportunity to offer free, subsidized COBRA coverage versus continuing to pay, it's a no-brainer. They will opt for free COBRA coverage," Rasnick said.
A Democratic aide for the Education and Labor Committee said paying a furloughed employees' premiums could help employees wait longer before trying to find another job and maintain the employer-employee relationship, which would allow employers to return to operations faster.
American Hospital Association Vice President Molly Smith said that the group supported COBRA subsidies as part of a "constellation of coverage solutions" that also included subsidizing employers' share of health insurance costs.
"We want to minimize disruption. There's no silver bullet when it comes to coverage, so we are advocating for more of a hybrid model," Smith said.
For self-insured employers that have to lay off employees, COBRA subsidies could mitigate the costs of adverse selection. Large employers often lose money on COBRA coverage because enrollees are more likely to pay the high premiums if they have existing medical conditions.
That dynamic could be exacerbated by a new, little-noticed rule issued by the Labor and Treasury Departments extending the amount of time employees have to apply for COBRA coverage. Usually, individuals have 60 days to choose to enroll in COBRA coverage after they receive a notification. Now, enrollees have 60 days after the end date of the COVID-19 national emergency to sign up.
The new extended timelines could cause complications for employers, insurers and providers, especially if medical expenses are billed before a patient signs up for COBRA coverage, said Buchanan Ingersoll & Rooney attorney John McGrady.
"Somehow providers and insurers would have to have foresight into who is eligible for COBRA, and know whether mandated premiums are paid. I'm just not sure how this works as a practical matter," McGrady said.
Health insurance experts said substantial subsidies could incentivize more healthy employees who have been laid off to enroll. That would help employers keep a healthier risk pool, and ensure beneficiaries don't have to restart their deductible partway through a plan year. Many hospitals choose to be self-insured, Smith said, but the structure varies for different types of hospitals.
But Scott's proposal has already hit resistance from Republicans who want to attach the Hyde Amendment to the legislation, which prohibits federal funds from being used to pay for abortion except in cases of rape, incest, or if the pregnancy is determined to endanger the woman's life.
Healthcare experts say this could be the first time the Hyde Amendment would be applied to private health insurance plans, as Congress has previously passed COBRA subsidies without it.
"Congress has always treated employer coverage differently," said Families USA senior fellow Stan Dorn. "This is a flimsy, trumped-up excuse to deny healthcare to those who are struggling."
Republicans' complaints could potentially be solved if the subsidy is reduced so that COBRA enrollees still pay part of their premiums, said Council for Affordable Health Coverage Executive Director Joel White. But determining the right percentage would be a balancing act, as previous efforts to subsidize COBRA still resulted in adverse selection issues because the baseline cost is expensive.
Researchers in 2015 found the 65% COBRA subsidy in the American Recovery and Reinvestment Act of 2009 wasn't enough to entice the majority of eligible people to enroll.
"We found that those who had higher cost-sharing, who had higher incomes, were older, or were sicker were more likely to enroll in COBRA," the authors wrote in Health Services Research.
Pacific Business Group on Health health policy director Shawn Gremminger noted that healthcare costs have also risen since 2009, which means even the same subsidy would leave consumers with a proportionally larger share of healthcare costs.
House Democrats released the HEROES Act on Tuesday, though the GOP-led Senate has not indicated any intention to act on it. An aide to Senate Finance Committee Chair Chuck Grassley (R-Iowa), who leads the committee with jurisdiction over the issue, said the senator has not taken a position on COBRA subsidies but that the policy is part of ongoing discussions.
