COBRA health insurance unaffordable for most unemployed

Washington, United states, January 12: The latest report by Families USA says that the unemployed find COBRA too expensive for health insurance. The result is that the high rate of unemployment has increased the number of people without health insurance cover.

Due to a surging unemployment rate in the past year following a recession, many unemployed Americans find it hard to purchase health insurance through their former employer as it eats up nearly 30 percent to 84 percent of standard unemployment benefits, the report stated.

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides 18 months of health insurance to workers who have been laid off from a firm having 20 or more employees. However, the COBRA makes it mandatory for the individual to pay 102 percent of the policy’s full cost, a fact which has rendered many jobless people with no health coverage.

According to the findings of the Kaiser Family Foundation report, a 1 percent increase in unemployment is accompanied by a 1.1 percent rise in uninsured population. Considering the recent unemployment rate of 7.2 percent in December 2008, a large number of unemployed find themselves in a double trouble of having no job and no health coverage.

Compared with family COBRA premiums of $1,069 (or 83.6 percent) of these benefits, national unemployment benefits are $1,278 a month.

The idea behind COBRA is to help workers and their families avail of health insurance if they are rendered unemployed suddenly. However, a large number of health insurance plans under this scheme are simply unaffordable as they cost 70 percent of the government compensation provided to the unemployed. As a result, just 25 percent of those eligible for COBRA actually sign up for it annually.

In nine states, the average premium for health insurance coverage exceeds or equals the unemployment benefits.

“This very important right is not meaningful in reality,” said Ron Pollack, the Families USA’s executive director.

“COBRA health coverage is great in theory and lousy in reality,” Pollack maintained. “For the vast majority of workers who are laid off, they and their families are likely to join the ranks of the uninsured.”

The report by Families USA, an advocacy group has called for the subsidy proposed by Obama to become functional with immediate effect. President-elect Barack Obama, as part of his economic stimulus package, has planned to extend unemployment benefits to the cost of $80 billion to subsidize healthcare for unemployed workers. In 2008, the economy lost nearly 2.6 million jobs.

Rather than subsidizing health insurance policies, Health policy analyst Nina Owcharenko of the conservative Heritage Foundation felt, a better option would be to offer the unemployed high-deductible private policies or new state-based programs.

Currently, there are about 47 million Americans with health insurance.