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Lost Job = Lost Insurance

Americans who lose their jobs lose their health insurance.

Because most workers get their own and their families’ health insurance through their employers, losing a job means losing healthcare coverage as well as income. About two-thirds of workers can benefit from a law known as COBRA, which requires employers to allow laid-off workers to maintain their previous benefits for a certain period of time. The problem for many of these workers is that their former employers had been paying a large percentage of the cost of their health insurance premiums. Under COBRA, workers must pay the whole amount themselves, which is generally four to six times what they were paying as employees.

The cost of COBRA coverage is especially steep at a time when workers have also lost their incomes. In fact, only 9% of workers eligible for coverage under COBRA choose to buy it (Doty, et al., 2009). The American Recovery and Reinvestment Act, also known as the “stimulus bill,” temporarily helps laid-off workers maintain their health insurance by paying 65% of COBRA's premium cost for 9 months. Workers pay the other 35% (U.S. Internal Revenue Service, n.d.).

After a period without health insurance, workers with health problems may have to wait longer than healthy new employees for employer-sponsored health insurance benefits to start. Under the Health Insurance Portability and Accountability Act (HIPAA), new employers cannot delay the start of all health benefits for workers with health problems, but they can withhold for up to a year any benefits related to an illness diagnosed or treated within 6 months prior to starting the new job (U.S. Department of Labor, n.d.)—commonly referred to as preexisting conditions. During that time, the employee may have to pay the entire cost of treatment for the preexisting condition. Once the employee has worked at the company long enough, he or she is eligible for full insurance benefits, including benefits for the preexisting condition.

Sources

Doty, Michelle, Sheila D. Rustgi, Cathy Shoen et al. 2009. Maintaining Health Insurance During a Recession: Likely COBRA Eligibility. The Commonwealth Fund, January. www.commonwealthfund.org/Content/Publications/Issue-Briefs/2009/Jan/Maintaining-Health-Insurance-During-a-Recession--Likely-COBRA-Eligibility.aspx

U.S. Internal Revenue Service. COBRA Health Insurance Continuation Premium Subsidy. www.irs.gov/newsroom/article/0,,id=204505,00.html.

U.S. Department of Labor. Frequently Asked Questions about Portability of Health Coverage and HIPAA. www.dol.gov/ebsa/faqs/faq_consumer_hipaa.html.

Since 1997, The Health Foundation of Greater Cincinnati has invested over $111 million in projects that improve the health of the Cincinnati area. With major healthcare reform imminent, the Health Foundation aims to be a source for credible, timely information that can inform people in our region about the healthcare reform debate. While we do not support any specific plan or approach, we do support certain principles that we believe would improve access to healthcare and make our region healthier.

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Please visit http://www.healthfoundation.org/reform for more information.