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Laid-off workers face expiration of health benefit

Tuesday, December 1, 2009

WASHINGTON -- An auto parts employee laid off from his job last year has been able to hang onto his health insurance because the federal government has picked up most of the tab. That subsidy ends Tuesday for Don Hall and thousands of other Americans.

Hall's premiums will jump $500 a month, becoming unaffordable for him and his wife. A new study finds that many other workers will be in the same position unless Congress acts.

"That extra $500 is the difference between mortgage, insurance or a couple other items that are of course important to our health -- food, utilities, those kinds of things," Hall, of Castalia, Ohio, said in a phone interview Monday.

Will he be able to keep paying for health insurance for himself and his wife at the higher price? "Not for very long," Hall said.

At issue is a provision of the economic stimulus bill signed by President Barack Obama in February that cut the price tag for COBRA, the federal program that allows workers to keep their company's health insurance plan after they leave their job.

Prior to passage of the stimulus bill workers had to pay the full cost of their premium -- both their share and their employer's share, plus an additional administrative fee -- in order to keep their coverage under COBRA. That made the policies so expensive that only a minority of eligible workers signed up.

The stimulus bill reduced the cost by 65 percent for workers laid off between Sept. 1, 2008 and Dec. 31, 2009. The measure was designed to stanch growth in the ranks of the uninsured as unemployment moved toward double digits. But the reduced-cost premium lasted only nine months, and with joblessness still high many workers are now facing the expiration of their health insurance subsidies before they've been able to find new jobs.

Those like Hall who started getting the subsidy in March -- the first full month after the stimulus bill was signed -- lose the subsidy Tuesday. After December it will no longer be available at all for laid-off workers, barring congressional action to extend it.

Democrats in the House and Senate want to act, but it's not clear how or when that could happen. One option is to include the subsidy extension in a larger jobs bill that's being discussed. Sen. Sherrod Brown, D-Ohio, whose office provided Hall's name, has introduced a stand-alone bill that would increase the subsidy and extend it for an additional six months.

A report being released Tuesday by the advocacy group Families USA finds that, on average, unemployed families who lose the COBRA subsidy 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, the group says.

It finds that premiums of $1,111 would consume 83.4 percent of the average unemployment check, leaving little for food, housing, and other necessities. In nine states -- Alabama, Alaska, Arizona, Delaware, Florida, Louisiana, Mississippi, South Carolina and Tennessee -- COBRA costs would actually exceed unemployment benefits.

The result will be tens of thousands of workers added to the rolls of the uninsured at a time when costs for people trying to buy insurance on their own are rising, Families USA says. Congress is searching for a long-term solution with Obama's health overhaul legislation, but even if that does get passed, it would take years to implement.

Meantime, "The federal COBRA subsidy has been a real lifeline for laid-off workers and their families and the withdrawal of that lifeline will probably mean that the laid-off worker and family are likely to join the ranks of the uninsured," said Ron Pollack, Families USA executive director. "So as an interim measure it is critically important to restore the COBRA subsidy so that health coverage continues to be affordable."

It's not clear how many workers are using the COBRA subsidy, though the Congressional Budget Office and the Joint Committee on Taxation estimated early on that 7 million would do so. IRS spokesman Anthony Burke said Monday that the agency does not yet have figures.


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