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 New Report Shows Recovery Act Cobra Subsidy Helping Middle Class Families Maintain Health Insurance


5/19/2010

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Survey Provides First Profile of Individuals Using COBRA Subsidy;

80 Percent are Middle Class Families

WASHINGTON – The U.S. Department of the Treasury today released a new report showing that the COBRA health insurance subsidy provided under the American Recovery and Reinvestment Act (Recovery Act) has been especially important for middle class families by helping them maintain health insurance coverage during the recession.   The analysis, conducted by the Treasury Department's Office of Economic Policy, provides the first summary of the profile of unemployed individuals who obtained continuing health insurance coverage with the help of the Recovery Act COBRA subsidy.

"Many Americans who are out of work as a result of the recession have been hit with a double whammy when they lost not only their job but also the health insurance that went along with it," said Alan B. Krueger, Assistant Secretary for Economic Policy and Chief Economist at the Treasury Department.  "The COBRA subsidy provided under the Recovery Act to help pay for health insurance premiums has dramatically reduced the cost of insurance for families and allowed them to maintain their insurance when they need it most."

The Recovery Act established a tax credit that paid 65 percent of the cost of health insurance premiums for eligible unemployed workers who maintained their employer­ sponsored health insurance through the COBRA continuing health insurance program.   Normally, workers on COBRA coverage are required to pay up to 102 percent of the total cost of the premiums.   For a typical family nationwide, the Recovery Act subsidy reduced the cost of COBRA from about $13,500 to $4,725.

Drawing on a new representative survey of more than 6,000 New Jersey workers who were receiving Unemployment Insurance in the fall and winter of 2009, the Treasury analysis provides the first summary of the profile of unemployed individuals who obtained continuing health insurance coverage with the help of the Recovery Act COBRA subsidy.

Taking into account the main eligibility requirements for the COBRA subsidy, the report finds that between one quarter and one third of eligible unemployed workers enrolled in subsidized COBRA for continuing health insurance.  In addition, around 80 percent of individuals who made use of the subsidy are from households with annual incomes in the middle three quintiles of the household income distribution in New Jersey.   Thus, the subsidy appears to have been especially important for maintaining health insurance coverage for middle-class families during the recession and likely reduced the number of Americans who would otherwise have gone uninsured during the recession.  

 

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