ARRA and Its Effects

The ARRA legislation passed in February of 2009 has helped many Americans over the last two years. The legislation provides for a 65% health insurance subsidy for people who have lost their jobs since September 1, 2008. Recipients must be sure that they qualify, both from a salary perspective and due to the date that they lost their benefits. Once they qualify, the subsidy can continue for up to 15 months, or until they qualify for other insurance. Since COBRA is generally very costly, this helps people to keep their insurance in place up to 15 months of the 18 month COBRA period.

There are several unintended consequences with this legislation. First, people who decide to take advantage of this subsidy are banking on continuing to be healthy in the next 15 months. If any family member becomes uninsurable during the subsidy period, that individual will have fewer options for coverage after the COBRA subsidy ends.

Second, this can enable people to postpone a decision on health insurance that they might not want to postpone. It is usually an eye opener for people to have an agent shop coverage for them so that they know their options when the subsidy ends. They may not even do that if they are eligible for the subsidy.

Third and most importantly, this is a very subtle way to get Americans who would normally not be dependent on the Federal Government to start depending on government assistance. Greece is the most compelling example of why we would not want to continue this trend. Once Americans get used to having assistance, it will be very hard to take it away.