Less than 10% of unemployed extend their former emplyer's health insurance coverage through cobra - study finds
26 01 09 - 12:13
Jobless Can't Afford to Extend Health Coverage
By M.P. MCQUEEN - The Wall Street Journal
Fewer than one in 10 jobless workers extends their former employer's medical coverage, a new study has found.
An analysis by the Commonwealth Fund finds that while two-thirds of working adults would qualify to extend health-insurance coverage under a federal law after losing a job, only 9% of the unemployed do so.
Workers are guaranteed the right to extend their medical benefits for a limited period under a federal law called Cobra, short for the Consolidated Omnibus Budget Reconciliation Act. The law generally covers group health plans of private and government employers with 20 or more workers, according to the Labor Department.
The Commonwealth Fund analysis, based on 2007 health-insurance survey data, found that most workers can't afford to pay for Cobra coverage. It costs an average $13,000 a year for a family, compared with the average annual worker contribution of $3,200 for family coverage while employed.
That is because the employer usually is picking up three-quarters of the cost of health insurance. Under Cobra, employees must pay the total cost, plus a 2% administrative fee.
"In other words, you have to pay an extra $10,000 because you have lost the amount your employer was contributing to the coverage, and people who are newly unemployed find it very hard to afford," said Karen Davis, president of the Commonwealth Fund, a private foundation that supports health-care research.
The report says that Congress could consider subsidizing three-quarters of the cost of Cobra for unemployed workers and extending Cobra eligibility to 24 months from 18 months, under its economic-stimulus package.
The National Center for Policy Analysis believes there is a problem with the Commonwealth Fund's proposal. "They are trying to buy people back into their old employer's plan when what people need is a personal, portable insurance that they can take with them from job to job," says John Goodman, president of the Dallas-based think tank. The center supports health-care overhaul emphasizing individually owned insurance and health-savings accounts.