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Unemployment extension 101: how health care is affected

Congress excluded a subsidy for 'COBRA' from the unemployment-benefits extension. As of June 1, thousands of unemployed face higher insurance costs.

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“It has a $500 a year cap on prescription drugs,” she says, an amount that she anticipates they will reach quickly.

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At this point it’s hard to say how many other people are in the same situation as Wild, but it could be a significant number.

In May, a Treasury Department report [PDF] said a survey of 6,000 unemployed residents of New Jersey found 25 percent to 33 percent used the COBRA subsidies. According to the Treasury, for a typical family, the subsidy, which was originally part of the Obama stimulus package passed in 2009, reduced the cost of COBRA from about $13,500 per year to $4,725.

The survey found it was used by families who had been making between $30,000 and $134,000 per year.

For many individuals, COBRA coverage without the subsidy is too expensive if an unemployment check is their only source of income. According to Families USA [PDF[, there are eleven states where the cost of COBRA coverage exceeds people's unemployment checks. For the US as a whole, COBRA costs an average of 84 percent of an individual’s unemployment check.

“The middle income need this subsidy,” says Judy Conti of the National Employment Law Project (NELP) in Washington. “Hopefully, people with high incomes have some nest egg.”

There are many companies that advertise themselves as less expensive alternatives to COBRA. However, Ms. Conti says, “You get what you pay for – hopefully it covers someone if the kids get sick or someone has a chronic disease.”

Since 2009, Congress has renewed the COBRA subsidy four times. Almost immediately after the latest subsidy expired, a group of Democratic legislators introduced legislation to renew it through the end of November.

One of those seeking to do so is Sen. Bob Casey (D) of Pennsylvania. He tried to attach it as an amendment to a tax extender bill as well as as a free-standing piece of legislation. It was blocked by Republicans both times, he says.

He says he would have raised enough revenue to pay for the COBRA subsidy by changing the rules on a trust used by the wealthy to pass on large gifts to their heirs without paying significant taxes. Now, no action on the legislation is expected until after the August recess, if even then.