The stimulus bill is supposed to create jobs, but some companies might see a painful bite from parts of the bill.
Tucked into the recently signed stimulus bill was a provision to subsidize 65% of the cost of COBRA insurance for as many as 7 million individuals who have lost their jobs. I'm sure it's a welcome relief for employees at companies such as Pfizer
They'll be responsible for tracking down the former employees and letting them know that they're eligible for the new discount. The added expense will add a little insult to injury for the companies trying to pare down expenses, but health insurers like WellPoint
It's ironic that increased revenue could injure these companies. One of UnitedHealth Group's
Think about it. Even at the discount price, who's going to sign up for the COBRA insurance after they've just lost their job: healthy patients, or those with chronic medical conditions? Health insurance, by its very nature, requires the healthy people to balance out the sick -- without them, it's just charity.
The subsidized cost could even attract some very high-cost members. Someone considering taking COBRA to get an elective surgery might wait at the higher price, but decide to sign up at the lower subsidized rate.
Fortunately, unless things get really bad, COBRA insured members won't be a major percentage of the HMO's membership, and the coverage will eventually run out anyway. Still, it seems a little wrong to punish companies that have already taken their fair share of bites from this bear market.
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WellPoint, UnitedHealth, and Pfizer are Motley Fool Inside Value picks. UnitedHealth is a Motley Fool Stock Advisor recommendation. Pfizer is a former Motley Fool Income Investor pick. Try any of our Foolish newsletters today, free for 30 days.
Fool contributor Brian Orelli, Ph.D., would love to have 65% of his health insurance subsidized but doesn't want to lose his job to get the benefit. He doesn't own shares of any company mentioned in this article. The Fool owns shares of UnitedHealth and has a disclosure policy that won't bite you.