COBRA Premiums Consume 84 Percent of Unemployment Benefits

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To maintain their employer-based health coverage under COBRA, most unemployed people would have to devote an unrealistically high proportion of their incomes to health insurance. For many, it would take their entire unemployment check and more to continue health insurance coverage for themselves and their families. However, if laid-off workers do not continue their employer-based coverage by electing COBRA and instead seek coverage in the individual health insurance market, those with health problems are likely to find that no insurer will sell them a policy that will cover their pre-existing conditions at any price.

In 41 States, COBRA Premiums Cost More than Three-Fourths of Unemployment Benefits; in Nine of Those States, They Cost More than 100 Percent

A report issued on the same day that the government released its latest unemployment data shows why most laid-off people are likely to lose their health coverage: The average national premium costs for family COBRA coverage consume almost 84 percent of average unemployment benefits.

The report, issued by the consumer health organization Families USA, focuses on the unaffordability of COBRA coverage, which allows laid-off workers to retain their employer-based insurance if those laid-off workers pay the full cost of that coverage.

The average unemployment insurance (UI) benefit varies substantially from state to state, as do average COBRA premiums. According to the report:

* On average, nationally, UI monthly benefits are $1,278, while COBRA monthly premiums for family coverage are $1,069, or 83.6 percent of UI benefits.

* In 41 states (AL, AK, AZ, AR, CA, CT, DE, FL, GA, ID, IL, IN, IO, KS, LA, ME, MD, MI, MS, MO, MT, NE, NH, NM, NY, NC, ND, OH, OK, OR, PA, SC, SD, TN, TX, UT, VT, VA, WV, WI, and WY) plus the District of Columbia, COBRA family coverage premiums, on average, consume more than three-fourths of average UI benefits.

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* In nine of those states (AL, AK, AZ, DE, FL, LA, MS, SC, and WV), the average COBRA premiums equal or exceed average UI benefits.

* In 17 states (AL, AK, AZ, DE, FL, LA, ME, MS, MO, MT, NE, NH, SC, SD, TN, WV, and WI) plus the District of Columbia, COBRA premiums for single coverage of workers consume, on average, more than one-third of UI income.

“COBRA health coverage is great in theory and lousy in reality,” said Ron Pollack, Families USA’s Executive Director. “For the vast majority of workers who are laid off, they and their families are likely to join the ranks of the uninsured.”

Among the 50 states, average monthly UI benefits range from $800 in Mississippi to $1,698 in Massachusetts. The average monthly COBRA premiums for family coverage range from $885 in Hawaii (and $915 in Nevada) to $1,191 in New Hampshire. The average monthly COBRA premiums for individual coverage range from $334 in Hawaii (and $336 in Arkansas) to $444 in Delaware.

In Michigan, which has been especially hard hit by the recession, the average monthly UI benefit for laid-off workers is $1,276. In order for those workers to retain employer-based health coverage for their families through COBRA, on average, they will need to pay $1,075 in premiums, or 84 percent of their UI benefits.

In Arizona, average monthly UI benefits are $937, compared to average family COBRA premiums of $1,084—116 percent of UI income. In Alaska, average COBRA premiums for family coverage consume 132 percent of UI income. In Louisiana, it is 115 percent; in Mississippi, 115 percent; in Alabama, 114 percent; in Delaware, 105 percent; in West Virginia, 104 percent; in Florida, 102 percent; and in South Carolina, 100 percent.

“The right to COBRA health coverage is a tragic ruse for millions of families whose breadwinner was laid off,” said Pollack. “Unemployed workers need either premium subsidies to help them afford COBRA benefits or temporary health safety net coverage through Medicaid.”

The report’s data about UI benefits in the states were obtained from the U.S. Department of Labor. Data are available in weekly increments, and Families USA multiplied these by the standard 4.3 conversion factor to arrive at monthly payments. The COBRA premium costs are based on an update of the Medical Expenditure Panel Survey developed by the Agency for Healthcare Research and Quality of the U.S. Department of Health and Human Services.

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