Health Policy Online No. 2
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
Note: This report is available in its entirety in the Portable Document Format (PDF).
Introduction
In response to the accelerating economic downturn, the Bush Administration and Congress are developing an economic stimulus package. A number of proposals include temporary assistance to laid off workers to preserve their health insurance coverage between jobs.
For example, Senators Baucus and Kennedy would subsidize 50 percent of the premiums for those workers and their families who qualify for Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage and institute a new Medicaid option for workers displaced from small businesses and others who do not qualify for COBRA. Other alternatives suggest subsidies of 75 percent of the COBRA premium or a sliding scale. The COBRA health benefit, which was enacted in 1986, allows employees, retirees, and their families the right to temporarily continue health coverage at group rates through their former employers.1 Normally, coverage can be continued for up to 18 months, but the employee must choose the COBRA option within 60 days of termination.2
Efforts to assess the potential impact of such proposals are hampered by the fact that little data exist about who is eligible for COBRA and who among the eligible purchases the coverage. Data that allow for the identification of COBRA eligibility and coverage, however, are now available through the 1999 National Survey of America's Families (NSAF), and form the basis for this analysis (see Sidebar).
The estimates provided here will help close the information gap. In addition to estimating rates of COBRA eligibility, this analysis shows the extent to which unsubsidized unemployed workers chose COBRA coverage and, for those that did not, what coverage they had.3 If large numbers of the unemployed are also uninsured, or not eligible for COBRA, proposals that blend subsidies for COBRA with a special Medicaid eligibility category may be needed.
1. COBRA applies to group health plans with 20 or more employees. It applies to private health plans and those sponsored by state and local governments, but does not apply to federal health plans or those sponsored by some church-related organizations. The plan may charge the former employee up to 102 percent of the group premium under COBRA.
2. In the case of the death of the employee, a divorce or legal separation, or the employee becoming entitled to Medicare, COBRA coverage can be continued for up to 36 months by the dependent.
3. We identify COBRA coverage as employer-sponsored insurance that the unemployed adult or the adult spouse has through a former employer they worked for within the past two years. We recognize that most former employees can only keep COBRA coverage for up to 18 months. We used two years as a cutoff because it was not possible within NSAF to identify the number of months since the last employer.
Usage, posting and reprint of materials on the UI web site:
Most publications may be downloaded free of charge from the web site in PDF format. This information may be used and copies made for research, academic, policy or other non-commercial purposes. Proper attribution is required. Copyright of the written materials contained within the Urban Institute website is owned or controlled by the Urban Institute. Posting UI research papers on other websites is permitted subject to prior approval from the Urban Institute—contact paffairs@ui.urban.org.
If you are unable to access or print the PDF document please contact us or call the Publications Office at (202) 261-5687.
Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
