Helping Laid-off Workers Keep Health Insurance
October 4, 2001
Among the ideas to assist newly laid-off workers from the airlines and other industries is helping them retain their health insurance coverage.
Newly unemployed workers may continue their health benefits through COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985), but they have to pay 102 percent of the premium cost whether the premium was paid previously by the employer or the employee. And COBRA premiums increase along with the cost of the former employers' health insurance.
- A recent survey sponsored by the Kaiser Family Foundation found that employer-sponsored coverage in 2001 cost on the average $7,056 for a family and $2,652 for an individual worker.
- HMO coverage cost somewhat less and traditional "major medical" coverage quite a bit more (see figure).
- Employers are looking at premium increases averaging 20 percent in 2002, according to the William M. Mercer consulting firm, so the $7,000 premium today may easily go up to $8,400 in 2002.
While the value of employee coverage was excluded from all taxes, the unemployed worker will get no tax assistance with the COBRA premium. Thus a worker will have to earn anywhere from $11,000 to $13,000 before taxes to pay the $7,000 family premium.
Congress could help the unemployed and those whose employers don't offer health benefits by providing refundable tax credits to all workers who have to pay for their own coverage. They could also extend to all Americans the right to a Medical Savings Account (MSA). MSAs combine a tax-free savings account with a high-deductible insurance policy, but most workers aren't eligible. MSAs would have provided workers with a source of funds to pay for coverage while they are unemployed.
Source: Greg Scandlen (senior fellow in health policy), "Helping Laid-Off Workers Keep Insurance," Brief Analysis No. 373, October 4, 2001, NCPA.
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