Unemployed who are losing COBRA subsidy face dramatically higher insurance payments

The temporary federal subsidy program that helped thousands of unemployed people cover the costs of their health insurance is coming to a close, but government officials are looking for ways to continue it.

"Millions of unemployed Americans face the prospect of a huge increase in health insurance costs, thanks to the looming expiration of a government subsidy," The Los Angeles Times reports. "The American Recovery and Reinvestment Act, passed in February, launched a temporary government program to subsidize the often crippling cost of buying health insurance through a former employer's plan after a layoff. However, the so-called COBRA subsidy was designed to last no more than nine months for each person who was unemployed. Hundreds of thousands who got this subsidy when it was first made available in March are slated to roll off the program today."

Without an extension of the subsidy, "hundreds of thousands will lose the subsidy each month, forcing them to pay health insurance premiums that are three times higher than what they're currently paying." A spokesman for the Obama administration says the White House wants to extend the subsidies, and "some Democratic lawmakers are pushing to include an extension in legislation that party leaders are developing to boost job growth. But finding money for an extension remains a major challenge, especially at a time when Democrats are struggling to pay for their planned healthcare overhaul. The stimulus bill committed $25 billion for just nine months of COBRA subsidies" (Kristof, 11/30).

The Associated Press: "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" (Werner, 12/1).

McClatchy: "Congressional Democrats are pushing to include some type of COBRA subsidy extension in a major jobs bill that's being crafted. Rep. Joe Sestak, D-Pa., and Sen. Sherrod Brown, D-Ohio, have introduced stand-alone legislation to extend the subsidies in the House of Representatives and the Senate, but it's unclear how soon any new funding can be secured. … A study by Hewitt Associates found that the number of those who took advantage of the cheaper COBRA insurance has doubled since the subsidy became available in March" (Pugh, 12/1).

The (Fort Myers, Fla.) News-Press: "For years, an estimated 80 percent to 90 percent of qualified workers shunned COBRA because they could not afford the premiums -- about $8,800 a year for the average worker" (Gluck, 12/1).

Meanwhile, The Wall Street Journal reports another way for struggling workers to make health costs more affordable: taking a tax deduction for medical expenses. "In the past, relatively few people have been eligible to take the deduction because it allows no write-off for expenses equal to the first 7.5% of adjusted gross income. (The Senate Finance Committee has voted to raise this hurdle to 10% next year.) So a taxpayer with $80,000 of AGI and $10,000 of medical expenses would have to disallow the first $6,000 before getting a deduction for the remaining $4,000. Unlike a tax credit that counts dollar-for-dollar against the amount you owe, a deduction simply reduces income. And you need to keep records. Within these constraints there is good news, however. The medical deduction covers a wide range of expenses—everything from contact lens solution, physical therapy and acupuncture to home health care, medical travel and even part of the cost of some swimming pools" (Saunders, 11/1).

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This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.