Thursday, June 17, 2010

Casey/Brown (OH) Amendment (#4371) on COBRA Subsidies

Senators Casey and Brown (OH) have offered an amendment (#4371) regarding COBRA health insurance subsidies.  A vote is possible later today.  This amendment may be subject to a Budget Act point of order for exceeding aggregate spending caps.
  • The amendment would extend eligibility for federal subsidies of COBRA continuation coverage first included in the “stimulus” (P.L. 111-5).  The amendment would allow individuals currently eligible for subsidies – those suffering a loss of employment prior to May 31, 2010, when the subsidies lapsed – to continue receiving a maximum of 15 months of subsidized coverage.  Individuals laid off after June 1, 2010 would receive only six months of subsidies.
  • The amendment includes elimination of the advanced refundability of the Earned Income Tax Credit (EITC) as a pay-for.
  • The Democrat argument that this amendment is paid for is factually dubious on several levels.
  • Although a CBO formal score for the Casey/Brown amendment is not yet available, a six month extension of COBRA subsidies initially included in Section 511 of the House version of H.R. 4213 was scored as costing $6.8 billion.  When included in the President’s Fiscal Year 2011 budget, the Joint Committee on Taxation scored elimination of the advance EITC as saving only $1.2 billion over ten years.
  • While scaling back the subsidy length for newly eligible individuals (i.e. those laid off after June 1, 2010) may reduce the apparent cost of the amendment, many may view this as a budgetary gimmick.  Section 1010 of the Department of Defense Appropriations Act (P.L. 111-118) extended the subsidies from the nine months originally included in the “stimulus” to 15 months.  Given that Democrats have already extended the length of COBRA subsidies once this year, some may question whether the majority will try to lengthen the subsidy duration again at the first possible opportunity.
  • The amendment sponsors are citing an interim report on the COBRA subsidy recently released by the Treasury Department as evidence that the subsidy extension will cost less than the CBO projects.  The Treasury report stated that the program has cost $2.1 billion to date, and served just under 2.2 million households.  However, at the time of the “stimulus” JCT estimated that the subsidy would benefit 7 million individuals.  Even after accounting for an average American household size of 2.59 persons, the 2.2 million households cited in the Treasury report mean that about 5.6 million individuals received some benefit from the subsidies—or nearly 20% fewer than the 7 million projected.  Some may view the smaller cost—because fewer individuals than expected participated in the program in the first place—as evidence that the program is ineffective and should be discontinued, NOT extended.
  • Democrats themselves have raised concerns about the repeated extensions of COBRA subsidies, with little oversight or evaluation by Congress as to the program’s merits—one reason why a six-month COBRA extension was not included in the House-passed extender package.  Rep. Stephanie Herseth Sandlin (D-SD) told CongressDaily last month: “COBRA, that’s never had a hearing. That’s never had a congressional hearing, yet some in our Caucus think that automatically should be extended ad infinitum…There are constituents in our districts who are working and don’t get any help paying for their health insurance and yet we’re going to subsidize COBRA for people who may lose their jobs next month. … So we think some of these provisions warrant far more scrutiny than they’ve received to date.”