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Thursday, August 19, 2010

Health Insurance Premium Assistance for the Unemployed: The American Recovery and Reinvestment Act of 2009

Janemarie Mulvey, Coordinator
Specialist in Aging and Income Security

Hinda Chaikind
Specialist in Health Care Financing

Bernadette Fernandez
Analyst in Health Care Financing

As the nation enters its third year of the current economic recession, the unemployment rate is currently near 10%. 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. Initially, the subsidy was 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. On December 19, 2009, the Department of Defense Appropriations Act 2010 (P.L. 111-118) extended the eligibility period for the COBRA subsidy by an additional two months (through February 28, 2010) and the maximum period for receiving the subsidy was also extended an additional six months (from 9 to 15 months). On March 2, the Temporary Extension Act of 2010 (P.L. 111-144) was enacted into law and extended eligibility for COBRA premiums subsidies to individuals who are involuntarily terminated through March 31, 2010. On April 15, the Continuing Extension Act of 2010 (P.L. 111-157) was enacted into law, extending eligibility for the COBRA premium subsidy to individuals who are involuntarily terminated through May 31, 2010. 

Under current law, individuals who are involuntarily terminated after May 31, 2010, would not be eligible for the COBRA premium subsidy. To address this issue, two legislative proposals have been introduced. H.R. 5647 would extend eligibility for the COBRA premium subsidy to those who were involuntarily terminated through September 30, 2010, and S. 3548 would extend eligibility through November 30, 2010. 

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. 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 reentering 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. It is estimated that 55% of those who were involuntarily terminated most likely had employer-sponsored coverage prior to being laid off and may benefit from the COBRA subsidies. 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. 

Date of Report: August 3, 2010
Number of Pages: 15
Order Number: R40420
Price: $29.95

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