The COBRA subsidies were a mess
They were promised free insurance. What they got was an administrative nightmare.
Remember the COBRA subsidies? You probably don’t, because they were around for less time than Quibi and no one even talked about it when they disappeared, unlike Quibi.
Between April and September 2021, premiums for COBRA plans—which allow people the privilege of paying for their old health insurance plan after they leave a job—were fully subsidized by the federal government, if you left your job involuntarily and met a couple other criteria. The American Rescue Plan Act, passed in March of 2021, paid for these subsidies as a coronavirus response measure.
When the subsidies ended, almost no one wrote about it. I did, though. As I wrote at the time:
Usually, COBRA is terrible-to-useless; it’s mostly just an insulting letter you get when you lose your job. The premiums are insanely high, hundreds or thousands of dollars, because you now have to pay the part your employer had been paying, plus up to two percent of the plan’s premium to cover your ex-employer’s administrative costs. Also, you just lost your job, so exactly what money are you supposed to use to pay these premiums? But with the subsidy, the choice became a no-brainer. Do you want to keep your insurance plan, with all you might have paid into your deductible and the network of doctors that you’ve had to fit your care into, for free? Of course you do. It’s free!
Having the government subsidize private insurers is a very silly way to provide people free healthcare. But it was certainly better than nothing, and especially better for those laid-off workers than giving them subsidies to buy a new plan on the ACA. Weird to do it for only six months, but looking back now, so long since the hopeful days of Build Back Better Round 1, it’s like, damn, I’d love a shitty little COBRA subsidy! Or literally anything, please! A Policy And Some Money For It would be just great!
Given how little attention was paid to the snuffing out of these subsidies, it’s not surprising we never heard much about how well they worked. You could imagine that it would actually be relatively easy to implement; everyone kept their old insurance, their old plan, their old doctors. These were people who were already in A System, who were already using or eligible for a COBRA insurance plan. The companies just had to use the subsidies to pay for them instead of charging premiums. For six months. What could go wrong?
A lot of things, it turns out.
Below are the stories of three people who had trouble receiving the subsidies they were owed, who spent hundreds of dollars on premiums while waiting for reimbursement. They should not have had to do this. In its April 2021 guidance on the COBRA subsidy, the Department of Labor warned (emphasis added):
plans and issuers should not collect premium payments from Assistance Eligible Individuals and subsequently require them to seek reimbursement of the premiums for periods of coverage beginning on or after April 1, 2021, and preceding the date on which an employer sends an election notice, if an individual has made an appropriate request for such treatment.
This didn’t happen for the people I interviewed. They called, making that “appropriate request,” and were told that the company was figuring it out, they should keep paying, and they’d get reimbursed later. It’s yet another way in which the employer-provided health insurance system leaves workers vulnerable: Anytime a benefit is supposed to be provided by employers, it is possible that they’ll fuck it up, and the COBRA subsidy was no exception. It’s one thing to throw some money at premiums; it’s quite another to actually make sure it gets to workers. That’s much harder, especially when it involves oversight of thousands of businesses and plans.
The people I spoke to for today’s post had to chase down reimbursements for payments they shouldn’t have had to make, and clear up obvious administrative errors that the companies involved didn’t seem to care about. They spent hours on the phone. In two cases, only government intervention kicked them into gear. And in one case, the guy is still waiting for his check, more than a year later.
In 2018, Lucas got a case of the flu that never really went away: Breathing made his chest hurt, he was fatigued, and he developed joint pain. (Later testing would reveal that Lucas has an autoimmune disorder known as seronegative arthritis, a form of rheumatoid arthritis where the patient doesn’t have the antibodies that most RA patients have.) By the summer of 2019, he couldn’t work his job as a chemist any longer, so he took time off on long-term disability insurance. In the spring of 2021, he was let go from that job, just as the COBRA subsidy was passed. In April, he called his employer’s benefits management company to ask about getting that subsidy, and was told that the company “was not quite sure yet” how the subsidies would work; hold tight, they promised, and “by June” he should hear about it.
Late June rolled around, and Lucas had not heard about it. So he called again. He was told that he had somehow been accidentally listed as a voluntarily dismissal on their system, which would have meant he didn’t qualify for the subsidies. After calling his employer’s HR department in August, they told him it was being fixed. It all seemed to be taking a while, but he was “told this whole time, once this gets cleared up,” he’d get his subsidy.
In September, the last month covered by the subsidies, Lucas called again and “asked specifically, ‘is there any more forms or anything that I need to fill out?’” Once again he was told no; it “may take a month,” but once his COBRA period was up, he would get the remainder as a check. (Again, this is not how it was supposed to work.) On September 22nd, he got email from his benefits company, telling him to check his messages—of course, they can’t just actually email him, so he would have had to sign into his account see the message. “I just kind of lose track of things,” Lucas told me, so he didn’t wind up checking out the message. After all, they told him it was being fixed.
By this time, Lucas had no income or prospect of being well enough to work, so he decided to get on Medicaid. He called the COBRA administrator in December to check his coverage was terminated, and while he was checking on that, he asked about the subsidy. They told him he had received a message on September 22nd with a form he needed to fill in. Lucas asked if he could still apply for it; it was thousands of dollars, after all.
To do this, the company said they would have to keep his insurance plan active. Once the issue was fixed, he was assured, they would backdate his coverage and reimburse all the premiums. As Lucas noted, he had no leverage, because they’re the ones that owed him money, and “it's not like I can withhold anything.” So he told them to go ahead, thinking it would take a week or so.
He went and checked out the message he had received back in September, which said that he had to fill out a form, and that the form would be under the documents tab. There was nothing in his documents. He called back in January to let them know the form wasn’t there, and ask if he can do anything to speed this up. Not to worry, he was told—they were “seeing some glitches” on their end.
Meanwhile, this phantom coverage began to cause him problems. Lucas takes buprenorphine for his chronic pain, a drug that is often used to help opioid users taper off their dependency. Discontinuing use of it suddenly can be extremely uncomfortable, producing symptoms very similar to opioid withdrawal, including nausea and vomiting, fever, and other flu-like symptoms—on top of his autoimmune condition. So when he went to the pharmacy and was told that Medicaid wouldn’t pay for his medication, because their system was showing that he had active coverage on another plan, he didn’t know what to do; if he tried to use his COBRA insurance at all, he wouldn’t be able to get that refund. (And his deductible would have reset on January 1, anyway.)
At this point, he started calling the company almost every day. He couldn’t use his Medicaid coverage until they turned off the COBRA plan, and they couldn’t turn off the COBRA plan until they fixed the subsidy issue. Over and over, their customer service told him they would call him back; they didn’t. He was “pretty low on cash,” relying on help from his parents and a patient landlord. He tried involving the Wisconsin state insurance commissioner, but they sent him to the Department of Labor because it was a COBRA plan; they weren’t able to help before the company fixed it. He tried talking to lawyers, but they wanted $500 upfront, and he was poor, disabled, and unemployed.
Eventually, the double coverage issue seemed to resolve on its own, and he was able to fill his prescription, after a couple weeks without pain medication. On March 3, almost a year after he was supposed to start getting subsidies in the first place, they finally called him back: They had figured the issue out, and he would be receiving a check for $3800. “On a gut check,” Lucas said, that amount was “bullshit.” He was paying $750 a month for premiums, so six months would come to $4500, plus the extra two months he had paid in 2022 while they kept his account open so they could fix the issue.
Finally, Lucas reached a manager and got the problem fixed: For some reason, his $2000-ish FSA balance had been applied to his account, making it appear as if he had a positive balance. He received the $3800 check, which he said was the correct amount accounting for months he didn’t pay because of that balance.
If you think this story was a complicated read, imagine living it. Lucas said he spent anywhere between 40 minutes and three hours on the phone every time he called, having to explain the issue over again each call, because it was never the same person twice. Sometimes he was doing this without his pain medication; he was always doing it while too disabled to work.
I’ll end Lucas’s story in his own words:
I typically only have two to three hours in a day where I can really focus on things. At the end of that time, I get mentally exhausted and brain fog starts kicking in and I'm just not able to do it. … But I'm not going to let them get away with taking my money. Fuck them. I will be the most annoying person because, what else are you going to do?
Part of what makes it so difficult, if you do want an advocate, you have to pay for it pretty much out of pocket. There's no one to help you with this system. You just have to hold it all together yourself.
When Mark (name changed) heard about the COBRA subsidy, he called his benefits company in the first week of April 2021 to ask about it. He was told he “would get the subsidy, but the government hadn't told them how it was going to work yet,” so he should just wait and keep paying. (His premiums were around $870 a month.) Mark asked them “several times” if he needed to do anything to get the subsidy, and was told there wasn’t. So he waited, and kept paying—and then “realized that I'd done it throughout the entire period, because it wasn't the first thing on my mind.”
Just before Thanksgiving, Mark called again to ask about the subsidy. But he was told that it was too late: They said there was, in fact, a form he was supposed to have filled out, and “I only had six months to fill it out; that six months had passed, so I couldn't get the money.”
Mark decided to email his old boss about the subsidy, and ask for what he was owed. He said he didn’t know what Mark was talking about, but would look into it. Eventually, his boss emailed back saying that the COBRA management company had told him Mark’s eligibility status was “unknown,” and that they were in the middle of changing their insurance provider; they had claimed they had reached out to him several times about continuing coverage, which Mark said was “a lie.”
After some Googling, Mark found the federal Department of Labor’s number, and called them. Mark said they weren’t that interested in it “until it finally sunk in that that I was claiming that they had never sent me a form, which they then took very seriously.” If the company couldn’t prove they had sent him the form, he would still be eligible to receive the subsidy. Mark emailed his old boss and told him to expect a call from the Department of Labor (what a treat, for any ex-employee to be able to pull that card).
A week later, the Department of Labor called Mark, and told him his old boss had never picked up their three phone calls; the old boss told Mark that he had never heard from them, that they never tried to get in touch. Mark simply told him that they would keep trying. The next day, the old boss sent Mark an email saying the COBRA provider was willing to send me a form, and “now they admit that they've never sent it and I could sign up and and try to get the subsidy.” He sent the form, and the COBRA provider offered to either reimburse Mark for the money he had paid in premiums, or to apply it to future months. He chose to apply it to future premiums.
Mark was very impressed with the Department of Labor’s efforts; one worker he was in touch with at the department even gave him her cellphone number. Without them, he might never have gotten thousands of dollars in premiums reimbursed. It would have been tremendously easy for his old employer and their benefits company to simply ignore him.
Harry (name changed) is our only subject still waiting for a refund. Harry left his nonprofit job in September 2020 and was still on COBRA when the premium subsidies were passed, so he was “relatively excited about the prospect of some government assistance.” He called Wageworks, the benefits management company contracted by his old job, and asked what the deal was; would he have to pay his premium for those months? Just like Mark, he was told they “didn’t have it set up yet,” and he would have to wait. He paid for April and May, and then in June, his bill showed up at $0. He wasn’t sure if that meant the subsidy was in effect, so he called to check; they “weren’t really sure,” but seemed to think so. He forgot about it for a while, and got a new job that summer, with coverage beginning on September 1.
He told Wageworks his new job was starting to get his plan canceled, and “their website documentation basically says just stop paying.” Still, “I tried to be proactive about that. I legitimately thought it was done and it's not like I'm getting proactive conversations from them anyway.” He carried on with life, starting his new job.
Then, the problems began.
In January this year, he got a new insurance card for his COBRA plan—a plan “that I had, to my mind, left three months prior.” He called the insurer and they told him yes, he did have a plan with them, and they would take care of canceling it. They did not; he found out they needed proof he had new coverage to disenroll him. “I sent them proof and then they wanted different proof,” Harry said. Of course they did.
At the same time, Harry also had to call Wageworks to get them to backdate his coverage to August 31st, when it should have ended. Just like Lucas and Mark, he was having trouble with doctors, who were telling him he had dual coverage (his old COBRA plan and his current employer plan).
Eventually, in February, one of the calls revealed they had canceled and backdated his plan—but only to January 1, months later than it should have been. (And it was only canceled for non-payment, they said.) Eventually, after more calls, he got them to backdate it again—this time, only to November 1. Harry is still stuck at this point, and he suspects “this has to do with the refund that I'm owed,” for the two months he paid that should have been covered by the COBRA subsidy. They owe him two months’ premiums, totaling over $800, and the plan is seemingly stuck with an end date two months later than it should be. Perhaps a coincidence, or perhaps they’ve found some administrative trick to keep the money. Or perhaps these are just the sort of problems that no one cares to look at very hard.
Worst of all, Harry said, is the experience of calling customer service. Often, the agents he talks to agree with him that the whole thing is messed up, but have seemingly no power to fix it. One agent Harry spoke to told him that even her own manager had hung up on her. His notes from these calls, which he shared with me, indicate that the problem seems to be that WageWorks needs his old employer to give authorization to backdate the plan, and that hasn’t been forthcoming. At one point, he asked the agent if he should contact his old employer; she said she has “never had a case where we send the client back to get the funds from the former employer,” but in her past experience in her job, “they're going to direct you back to us” anyway. Harry said he didn’t feel like a customer; more like “a third party dealing with multiple third parties,” none of whom seemed interested in doing their job to help him.
I emailed Wageworks and provided a detailed accounting of what’s happened to Harry, and asked if they planned to reimburse him. I received no response or acknowledgement.
Our final COBRA story is a sort of prequel. It predates the subsidy, but it’s a clear example of how mismanagement and fractured responsibility makes it more likely for mistakes to occur.
Tom left his job in November of 2017, and stayed on COBRA for the entire 18 month period of eligibility while freelancing. At the time, his wife was receiving chemotherapy for cancer (she’s all clear now), and he didn’t want to deal with the stress of choosing new insurance in addition to that.
In March of 2019, he received a letter saying his plan had been canceled, two months before his eligibility would expire. He emailed the COBRA administrator to ask why, and got an “inscrutable” response a few days later, saying that “the nature of the plan changed.” He would need to pay an additional “$200 or $300 a month for each of the two months” to keep that plan. He paid the extra money to keep the plan, or so he thought.
During that period, Tom went to a specialist “for something not very major.” He received a bill for that visit totaling over $1000. He tried to clear it up with the hospital, but they kept saying he had no coverage. “It really didn't occur to me,” Tom told me, “that I would've sent the COBRA administrator these $2,000 in separate checks and they would just do nothing with it.”
But that appears to be what happened. When Tom received his 1095-B form—the form you get from your plan administrator that tells you when you had insurance coverage from them, for the purpose of abiding by the individual mandate that no longer exists—the form said he hadn’t been covered those two months. He emailed the administrator and they were unhelpful, saying it was his insurer’s fault and they were trying to get them to correct it. After “months of emails back and forth,” Tom was no further forward, and he decided to complain to the California Department of Justice. He filled in a form at their website, and waited. (Here’s the form, if you live in CA.)
After a few weeks, he got an email from someone “high up” at his old company, asking him if he wanted a refund or extra months of coverage. He asked for the refund, and got over $3000, which he said was more than he was owed.
Later, Tom received “a packet” of correspondence from the DOJ, including correspondence with his former employer, which he said was “kind of funny”: “They were like, ‘No actually, we've offered him the refund and we were really diligently doing everything possible, and we've actually gone the extra mile to fix this.’” This was all nonsense, of course.
He ended up paying that $1000 hospital bill, but with the extra money they refunded him, it worked out to cover most of it. And all he had to do was get the fucking California Department of Justice involved.
If you were designing a health system from scratch, you would be absolutely off your rocker to keep the American model of tying healthcare to employment. It’s an expensive hassle for employers, who have limited ability to negotiate on prices they pay hospitals or limit premiums, which have reached an astounding $22,000 per year for a family plan. For employees, the link between health insurance and employment is more than a hassle: It’s oppressive. People are forced to stay at their jobs even after a cancer diagnosis because they can’t afford to lose insurance. If you change jobs, you lose anything you paid into your deductible, and your doctors might no longer be in network. It gives your boss another huge bargaining chip. And every change in insurance introduces new opportunities for administrative mistakes, mistakes that can cost you your coverage and your health.
It’s no wonder, then, that the brief COBRA subsidies could have led to the sorts of errors we discussed today. The problems people like Lucas, Mark and Harry experienced didn’t happen because of a government subsidy; they happened because this is how American healthcare works and doesn’t work, every single day. An employer pays a benefits manager who pays an insurance company who pays a hospital who pays a doctor. Responsibility for an individual’s healthcare is spread across multiple people and organizations, each with their own layers of administration and customer service departments. Bureaucracy leads to buck-passing, and unless an employee has the gumption to call the government (itself under-resourced), or the money for a lawyer, or the doggedness to stay on the phone and take notes, it’s almost always going to be simpler and more profitable to systematically make it harder to fix mistakes. And accountability for those mistakes is limited. At the end of the day, you’re the one missing your prescriptions, not them.
As a COBRA Administrator, I sent out over 35,000 individual ARP COBRA letters last year. We got a grand total of **two** letters returned claiming the premium credit.
Thanks for chronicling these stories, it's an abject failure of governance that we let it happen over and over again.