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Expiration of COBRA Subsidy: Millions of Uninsured Workers and Their Dependents Are at Risk; Many Will Lose Their Subsidy as of December 1, 2009

Courtesy: Families USA  http://www.familiesusa.org/assets/pdfs/expiration-of-cobra-subsidy.pdf

Americans who lose (or have already lost) their jobs are about to be dealt another blow: the expiration of the subsidy that allowed many of them to retain health insurance despite being unemployed. For many, that subsidy expires on November 30, 2009.

In February 2009, Congress enacted, and the President signed, the American Recovery and Reinvestment Act (ARRA) in response to the economic crisis. One important feature of ARRA was a health insurance subsidy for workers who lost their jobs. When this temporary subsidy expires, two groups of people will suffer damaging consequences:

  1. those who have been receiving the subsidy but who will soon reach the end of the nine months of assistance provided under ARRA (for those who began receiving the subsidy in March, the assistance expires as of November 30); and
  2. those who lose their jobs after December 2009, who will have no subsidy to help them afford health insurance for their families.

The loss of these subsidies will be severe: Unemployed families could see their premiums increase from $389 to $1,111 per month. An average monthly premium could consume 83.4% of the average unemployment paycheck, leaving little to survive on.

The ARRA subsidy is available to workers laid off between September 2008 and December 2009 who are eligible for COBRA continuation coverage. COBRA allows workers (and their families) to remain enrolled in their former employer’s health plan. Normally, COBRA guarantees 18 months of continued coverage (or a longer period in some cases), but the former worker must pay the full premium—both the employee share and the employer share—plus a small administrative fee. Under ARRA, these COBRA-eligible workers receive help paying for coverage for part of that period: they are eligible for a federal subsidy that pays 65 percent of the cost of their monthly COBRA premiums for up to nine months.

What the End of the Subsidy Means

One group of people who will be harmed by the end of this subsidy consists of those who began receiving assistance in March 2009. The subsidy they have received to help them pay their COBRA premiums comes to an end on November 30—even though many of these people remain unemployed. On average, these unemployed families will see their premiums increase from $389 per month to $1,111 per month, an amount that few long-term unemployed families will be able to afford. Monthly premiums of $1,111 would consume 83.4 percent of the average unemployment check, leaving little or nothing for food, housing, and other necessities.

Unless Congress acts to provide this subsidy for longer than nine months, each month from now on, another group of people will confront a painful choice: find a way to pay significantly higher premiums or drop their family’s health coverage. People who lose their jobs after December 31, 2009, will also be harmed by the expiration of the subsidy. This group of people will receive no COBRA subsidy at all, and, without a subsidy, most will not be able to afford coverage for either themselves or their families.

Although the rate of job loss is apparently slowing, the economy has not yet fully recovered, and many Americans will lose their jobs—and their health insurance—in the months ahead. Unless Congress acts to extend the subsidy to those who lose their jobs after December 2009, many families will join the ranks of the uninsured due to job loss.

The ARRA subsidy is available to workers laid off between September 2008 and December 2009 who are eligible for COBRA continuation coverage. COBRA allows workers (and their families) to remain enrolled in their former employer’s health plan. Normally, COBRA guarantees 18 months of continued coverage (or a longer period in some cases), but the former worker must pay the full premium—both the employee share and the employer share—plus a small administrative fee. Under ARRA, these COBRA-eligible workers receive help paying for coverage for part of that period: they are eligible for a federal subsidy that pays 65 percent of the cost of their monthly COBRA premiums for up to nine months.

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