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 (NYSE:PFE), Caterpillar (NYSE:CAT), and Boeing (NYSE:BA) who have lost or may lose their jobs, but it'll come at a price for the companies.
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 (NYSE:WLP), Aetna (NYSE:AET), and Humana (NYSE:HUM) could ultimately be hurt the hardest.
It's ironic that increased revenue could injure these companies. One of UnitedHealth Group's (NYSE:UNH) divisions, for instance, was expecting to lose between 1 million and 1.5 million members this year, but this isn't the kind of revenue that the health insurers need.
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.
Don't get bitten, read this additional Foolishness:
- China's stimulus plan will change the world.
- A running total on the bailout is looking mighty large.
- The stimulus plan could be a bitter pill for some investors.
