A new Treasury study says the federal COBRA subsidy, included in last year’s economic stimulus package, may have slowed the growth in the number of uninsured Americans during the recession. The study estimates that up to a third of eligible unemployed workers have taken advantage of the subsidy, which covers up to 65% of the cost of continuing a former employer’s health care coverage for up to 15 months.
Under COBRA, workers who leave their jobs can continue their former employer’s health insurance coverage for up to 18 months. Ordinarily, though, they must pay the entire premium, plus administrative costs, making COBRA unaffordable for most people who are out of work.
When Gail Small, 55, of Duluth, Ga., was laid off in February 2009, the subsidy allowed her to continue her former employer’s health insurance for about $100 a month. Without it, she says, she probably would have had to go without health insurance until she found another job, because it would have cost her about $300 a month.
“I can’t get privately purchased insurance because I’m over 50, and I’m diabetic,” she says. “I couldn’t even purchase cheap disaster-type insurance.”
The study, conducted by Treasury’s Office of Economic Policy, focused on more than 6,000 New Jersey residents who were receiving unemployment insurance during the fall and winter of 2009. Based on that sampling, the study estimates that between a quarter and a third of eligible jobless workers used the subsidy to continue their health coverage.
The percentage of uninsured Americans rose sharply following the September 2008 collapse of the financial markets, according to Gallup data. After the American Reinvestment and Recovery Act was enacted in February 2009, the uninsured rate flattened.
Some unemployed workers who didn’t enroll in COBRA may have been ineligible because they had access to a spouse’s employer-provided plan, says Alan Krueger, Treasury’s chief economist. Others may have been unable to afford COBRA premiums, even with the subsidy, he says. Some may have decided to risk going without health insurance until they found another job, he adds.
Eligibility for the COBRA subsidy was to expire this month, but Congress recently extended it to May 31. Once jobless workers qualify for the subsidy, they can receive it for up to 15 months.