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Summary

As the nation enters its second year of the current economic recession, the unemployment rate continues to rise, and is currently at a 25-year high. One consequence of unemployment is that people can lose their employer-sponsored health insurance coverage. The 111th Congress has passed legislation that begins to address this problem. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) includes provisions to subsidize health insurance coverage through the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and expand tax credits to unemployed workers through the Health Coverage Tax Credit (HCTC). ARRA includes COBRA premium subsidies of 65% to help the unemployed afford health insurance coverage from their former employer. The subsidy is available for up to 9 months to those individuals who meet the income test and who are involuntarily terminated on or after September 1, 2008, and before January 1, 2010. There will also be a special extended enrollment period for two groups of unemployed who were involuntarily terminated from their employment on or after September 1, 2008: (1) individuals who did not elect COBRA coverage at the time, and (2) individuals who had chosen COBRA coverage after September 1, 2008, but dropped their coverage because they could not afford the premiums. For these two groups, they are to be notified by their former employer within 60 days of enactment and will have an additional 60 days after being notified to elect COBRA and receive the subsidy. In addition, a number of provisions in ARRA make modifications to the HCTC and the Trade Adjustment Assistance (TAA) programs. These include increasing the HCTC from 65% to 80% of the cost of qualified health insurance, and expanding the eligibility criteria for TAA assistance (which, in turn, expands HCTC eligibility) to include service sector and public agency workers. Whether the unemployed will benefit from the premium assistance programs in ARRA depends on their individual circumstances. Those that are involuntarily terminated and lose their employer-sponsored health insurance may be eligible for the subsidy. Other individuals, although considered to be unemployed, will not meet the criteria of involuntary termination and therefore will not have access to the COBRA subsidy. This group includes unemployed individuals: (1) who were terminated but did not have employer-sponsored coverage to begin with, (2) who voluntarily left their jobs, and (3) who are just entering or re-entering the workforce. For those unemployed without health insurance coverage, they either rely on spouses and family members, purchase insurance in the individual market, or remain uninsured. According to the most recent census data, a little less than half of the unemployed (42%) reported being uninsured in 2007. It is estimated that 51% of those who were involuntarily terminated in February 2009 most likely had employer-sponsored coverage prior to being laid off and may benefit from the COBRA subsidies. It is difficult to determine how many will benefit from the expansions to the HCTC but since it is a relatively smaller program than COBRA it is likely to be a relatively smaller percentage. In addition to those who are unemployed, there are other at-risk groups who are not eligible for the premium assistance provisions in ARRA but may have lost health insurance coverage due to changes in their work status. These groups include involuntary part-time workers and discouraged workers who are no longer seeking employment.

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