Feeling the bite of COBRA

Stethoscope and $5 bills

TEXT OF STORY

Tess Vigeland: As fallout continues from the economic crisis, the House passed its version of a stimulus package this week: $819 billion dollars in spending on infrastructure, tax cuts and help for struggling state governments. Also buried in the 647-page bill: an expansion of COBRA health care coverage.

If you've ever left a job, you've heard of COBRA. You get to keep your health care plan, but you also get to pay for it. The new provision would require employers to offer COBRA for at least a decade instead of the current 18 months.

But as Sally Herships reports, COBRA's financial bite is enough to make anyone sick.


Sally Herships: Andrew Garda is taking a risk -- a big one. The cost of his family's health insurance was too much to bear, so Garda and his wife Melina opted to leave their kids uncovered for three months. Garda says after that their two sons can qualify for health care from the state of California. Now no one in the family is covered.

Andrew Garda: I'm making a choice for myself, my wife's making a choice for herself and that's one thing. But, you know, we're talking about our kids and that's a choice that we have to make for them and that's kind of scary.

Garda worked at an animation company in Los Angeles. About a year ago, the production he was on wrapped up.

Garda: When I first left my job, my wife was making significantly good money.

So Garda decided to stay home with the kids and try his hand at writing. But because his wife Melina was a freelancer, they were on their own when it came to health care.

Garda: We ended up having to go with COBRA. We thought we might have to do it short term, just found we couldn't get health care anywhere else.

The Gardas have pre-existing conditions. Their younger son had recently fractured his skull. Melina has chronic back problems. No private company wanted to cover them. They had no choice but COBRA.

Garda: I was happy that we had it because I think we were coming off of being rejected by health care providers and we're just like, "Well, at least we know that our kids can be covered."

Footing the bill for health care costs without help from an employer can be a shock, but it's an issue a lot of families are facing right now and one the Gardas thought they had under control.

Garda: When we first started, it was affordable -- if you can call $1,500 a month affordable.

Then Melina got laid off and Andrew couldn't find work. Their savings were gone quickly.

Garda: Occasionally it was pay for COBRA and pay other bills late. You start really wondering where you're ranking your health care as a necessity.

The Gardas were forced to choose between paying for COBRA and keeping the lights on in their home.

Sandy Praeger: And those are just choices Americans shouldn't have to make.

Sandy Praeger is the Kansas state insurance commissioner. She also helps the national government regulate insurance and protect consumers. She says there are 45 million Americans without insurance and even though health care is pricey, she says it's important to stay covered.

Praeger: It doesn't take long to run up a very, very, very high hospital bill, hundreds of thousands of dollars.

But footing the entire bill for your health care is expensive too and Praeger says COBRA is really only meant as a stopgap. But there are alternatives, like state plans for people with chronic medical conditions and private plans that only cover emergencies.

Praeger: You can go out and find catastrophic coverage for maybe $300 or $400 a month.

But it's still a gamble. Praeger says the deductibles on these plans are so high you need to be prepared to fork over thousands. And again she says, COBRA is only meant as a temporary fix.

Herships: So you've got to find a job?

Praeger: You've got to find a job, yeah.

After struggling to keep up with payments, the Gardas are in debt -- $13,000. I asked Andrew Garda if COBRA were a medication what he thought the label might say.

Garda: Side effects may include extra costs, draining of bank account and some hard choices.

Choices like deciding to move. The Gardas are headed from LA to Sacramento to live with family. They're hoping the change will remedy their dire economic situation.

I'm Sally Herships for Marketplace Money.

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