How the Unemployment Extension Affects Health Insurance

Posted in COBRA Insurance , Health Insurance , Medicaid

August 24th, 2010

President Barack Obama signed an unemployment benefits extension bill into law on July 22, 2010 that would stretch out benefits for nearly 2.5 million people who had exhausted their rights to unemployment checks. This bill set out to help workers who had been unemployed for six months or more. However, the bill’s passage did not go without heated debates between Democrats and Republicans in Congress.

In fact, in order to get the bill passed, Democrats had to make some sacrifices, including dropping a $25 a week bonus and eliminating an important COBRA subsidy. With the loss of this subsidy, those out of work are now in a tougher fix than before when it comes to acquiring health insurance.

How the COBRA Subsidy Worked

In March 2009, Congress approved what was then a nine-month subsidy to help laid-off workers pay for their COBRA benefits. The subsidy resulted in a 65 percent cut in costs for the unemployed individuals who chose to take advantage of the extension of employer health insurance.

This significant reduction was designed to help the unemployed pay for their insurance while receiving unemployment benefits. It had even been extended from its standard 18-week duration to 26 weeks. Unfortunately, the COBRA subsidy was dropped on June 1, 2010.

As a result, millions of unemployed workers found they would be forced to pay for their highly-expensive COBRA benefits on their own. Not to mention, they are now responsible for an additional 2 percent administrative fee, making it even more costly.

What Can Unemployed Workers Do for Insurance?

Now that the subsidy has been dropped, millions will have to figure out new ways to acquire affordable health insurance. Under the new health care reform law, some options will soon come available to both unemployed and employed workers.

• Health insurance exchanges: Health insurance exchanges were initiated by the federal government as a part of health care reform and will work as a way to offer low-cost options to individuals and families. Similar to the idea of group health care plan offered by employers, insurers will come together to offer insurance at cheaper rates. The exchanges are not required to open in each state until 2014. However, many are getting started as early as this year.
• High-risk pools: Health insurance high-risk pools are also state-sponsored options and are geared toward individuals who have preexisting conditions and have problems acquiring insurance otherwise. Unlike health insurance exchanges, each state had to create or expand an existing high-risk pool by July 1, 2010. Most states have already started accepting new patients for their pools.
• InsureKidsNow: If you’re trying to find insurance that caters to kids, you could visit InsureKidsNow.gov to learn more about the CHIP program and other options for acquiring affordable coverage for your children.

Also, in the near future, Medicaid will be adjusting its income requirements so that people with higher incomes will qualify.

Unfortunately, the unemployment extension had a negative effect on health insurance and workers’ ability to maintain affordable COBRA insurance. However, the compromise was one of many that we’re likely to see between parties as both try to appease voters for November midterm elections.