Wednesday, March 24, 2010

Health Insurance: A Primer (Part Three of Many)

Now I will talk about COBRA.

First of all, it's called COBRA. That should be enough to scare people away.

If that doesn't scare you, then just the length and wordiness of what the acronym stands for should.

Consolidated Omnibus Budget Reconciliation Act. COBRA. Generally speaking, I've found any phrase with the word "omnibus" in it is probably not good. But, I digress.

Here's what the US Dept. of Labor web page says about COBRA:

The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.

Basically, if someone gets laid off or chooses to move to a different company, they get to keep their health insurance coverage for a limited period of time while they seek new coverage.

Difficulties arise when someone with a pre-existing condition gets laid off or wishes to take a different job. In the first case, they are now unable to get health insurance. In the second, they are tied to their place of employment because to leave would be to lose needed coverage.

Raise your hand if you know someone in one of those two positions.

So, then, is the solution, to make expensive, freedom limiting, 2,700 page changes in the law that apply all Americans? No, the solution is to have health insurance purchased by the insured and not by their place of employment.

Here's how you do it, Congress. Instead of having the employer pay the employee a salary plus benefits. Have the employer pay the total value of both and let the insured purchase his/her own health insurance.

Then, have two lines on the income tax form. The first line subtracts the cost of health insurance premiums from wages so that the adjusted gross income does not include the cost of health insurance premiums. The second is a credit that would be added back to account for the extra FICA/Medicare that was withheld. (Not sure how the employer gets his matched FICA/Medicare back yet, but I'm working on it!)

So, lesson three. Health insurance should be owned by the insured and not tied to the place of employment. It should also not be taxed.

No comments: