Health Insurance Premium Assistance for the
Unemployed: The American Recovery and
Reinvestment Act of 2009
Janemarie Mulvey, Coordinator
Specialist in Aging Policy
Hinda Chaikind
Specialist in Health Care Financing
Bernadette Fernandez
Analyst in Health Care Financing
March 6, 2009
Congressional Research Service
7-5700
www.crs.gov
R40420
CRS Report for Congress
P
repared for Members and Committees of Congress
Health Insurance Premium Assistance for the Unemployed: ARRA 2009
Summary
As the nation enters its second year of the current economic recession, the unemployment rate
continues to rise, and is currently at a 25-year high. One consequence of unemployment is that
people can lose their employer-sponsored health insurance coverage. The 111th Congress has
passed legislation that begins to address this problem. The American Recovery and Reinvestment
Act of 2009 (ARRA, P.L. 111-5) includes provisions to subsidize health insurance coverage
through the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and expand tax
credits to unemployed workers through the Health Coverage Tax Credit (HCTC).
ARRA includes COBRA premium subsidies of 65% to help the unemployed afford health
insurance coverage from their former employer. The subsidy is available for up to 9 months to
those individuals who meet the income test and who are involuntarily terminated on or after
September 1, 2008, and before January 1, 2010. There will also be a special extended enrollment
period for two groups of unemployed who were involuntarily terminated from their employment
on or after September 1, 2008: (1) individuals who did not elect COBRA coverage at the time,
and (2) individuals who had chosen COBRA coverage after September 1, 2008, but dropped their
coverage because they could not afford the premiums. For these two groups, they are to be
notified by their former employer within 60 days of enactment and will have an additional 60
days after being notified to elect COBRA and receive the subsidy.
In addition, a number of provisions in ARRA make modifications to the HCTC and the Trade
Adjustment Assistance (TAA) programs. These include increasing the HCTC from 65% to 80%
of the cost of qualified health insurance, and expanding the eligibility criteria for TAA assistance
(which, in turn, expands HCTC eligibility) to include service sector and public agency workers.
Whether the unemployed will benefit from the premium assistance programs in ARRA depends
on their individual circumstances. Those that are involuntarily terminated and lose their
employer-sponsored health insurance may be eligible for the subsidy. Other individuals, although
considered to be unemployed, will not meet the criteria of involuntary termination and therefore
will not have access to the COBRA subsidy. This group includes unemployed individuals: (1)
who were terminated but did not have employer-sponsored coverage to begin with, (2) who
voluntarily left their jobs, and (3) who are just entering or re-entering the workforce. For those
unemployed without health insurance coverage, they either rely on spouses and family members,
purchase insurance in the individual market, or remain uninsured. According to the most recent
census data, a little less than half of the unemployed (42%) reported being uninsured in 2007.
It is estimated that 51% of those who were involuntarily terminated in February 2009 most likely
had employer-sponsored coverage prior to being laid off and may benefit from the COBRA
subsidies. It is difficult to determine how many will benefit from the expansions to the HCTC but
since it is a relatively smaller program than COBRA it is likely to be a relatively smaller
percentage. In addition to those who are unemployed, there are other at-risk groups who are not
eligible for the premium assistance provisions in ARRA but may have lost health insurance
coverage due to changes in their work status. These groups include involuntary part-time workers
and discouraged workers who are no longer seeking employment.
Congressional Research Service
Health Insurance Premium Assistance for the Unemployed: ARRA 2009
Contents
Introduction ................................................................................................................................ 1
Employer-Sponsored Health Insurance Coverage and the Unemployed ....................................... 1
COBRA Coverage for the Unemployed................................................................................. 2
COBRA Premium Subsidies Provided in ARRA.............................................................. 3
Health Coverage Tax Credit for the Unemployed......................................................................... 6
Health Coverage Tax Credit Provisions for Unemployed in ARRA........................................ 6
Potential Impact of ARRA Provisions on the Unemployed........................................................... 7
Potential Impact of COBRA Subsidy on the Unemployed...................................................... 8
Involuntary Terminations ................................................................................................ 8
Temporarily Furloughed................................................................................................ 10
Other Unemployed........................................................................................................ 11
Potential Impact of Health Coverage Tax Credit .................................................................. 11
Other At-Risk Groups Not Covered by ARRA..................................................................... 12
Involuntary Part-Time Workers ..................................................................................... 12
Discouraged Workers .................................................................................................... 12
Figures
Figure 1. Characteristics of Unemployed................................................................................... 10
Tables
Table 1. Specific Provisions For COBRA Subsidies in ARRA 2009 (P.L. 111-5).......................... 5
Table 2. Industry Characteristics of Unemployed and the Likelihood of Having
Employer-Sponsored Coverage, By Industry ............................................................................ 9
Contacts
Author Contact Information ...................................................................................................... 13
Acknowledgments .................................................................................................................... 13
Congressional Research Service
Health Insurance Premium Assistance for the Unemployed: ARRA 2009
Introduction
As the nation enters its second year of the current economic recession, the unemployment rate
reached a 25-year high of 8.1% in February 2009. Projections by the Congressional Budget
Office expect the unemployment rate to continue to rise throughout 2009.1 One consequence of
unemployment is that people can lose their employer-sponsored health insurance. Recent
estimates indicate for each percentage point increase in the unemployment rate, the number of
uninsured would increase by 1.1 million.2 The 111th Congress has passed legislation that begins to
address this problem. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-
5), signed into law on February 17 by President Obama, includes provisions to improve the
affordability of health insurance coverage through direct premium subsidies and tax credits to
eligible unemployed workers. This report discusses the following:
• employer-sponsored health insurance coverage and barriers to accessing health
insurance for the unemployed;
• provisions of ARRA with respect to unemployment and health insurance; and
• potential impact of ARRA provisions on the unemployed.
Employer-Sponsored Health Insurance Coverage
and the Unemployed
Employment-based health insurance is an important source of coverage to workers and their
dependents. In 2007, about 71% of workers received employment-based coverage from an
employer, either in their own name (54%) or as a dependent of another family member’s
employer (17%).3
A key feature of employer-sponsored insurance is that employers pay the major share of the cost
of insurance. In 2008, employers paid on average 85% of the cost of premiums for single
coverage and 75% for family coverage.4 Further, employer plan premiums reflect health care
risks that are pooled across a group of workers and their dependents, while premiums for
policyholders in the individual (or non-group) market are often “underwritten” and based on an
individual’s own set of health conditions.5 Most workers will benefit from risk-pooling of
premiums while some will not.
Prior to the enactment of ARRA, most laws focused on providing the unemployed with access to
employer-sponsored coverage (see COBRA discussion) but they did not address the cost issue.
The ARRA improved two key provisions that provide health insurance for the unemployed
1 Congressional Budget Office, Economic Projections for 2009 to 2019, January 2009.
2 Holahan, J. and A. Barret, Rising Unemployment, Medicaid, and the Uninsured. Urban Institute January 2009.
3 Employee Benefit Research Institute, Sources of Health Insurance and Characteristics of the Uninsured: Analysis of
the March 2008 Current Population Survey, September, 2008.
4 The Kaiser Family Foundation, Employer Health Benefits 2008 Annual Survey, Section 6: Worker and Employer
Contributions for Premiums, December 2008.
5 See CRS Report RL32237, Health Insurance: A Primer, by Bernadette Fernandez.
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Health Insurance Premium Assistance for the Unemployed: ARRA 2009
through direct subsidies of health insurance premiums and expansion of the health coverage tax
credit.
COBRA Coverage for the Unemployed
In 1985, Congress enacted legislation to provide temporary access to employer-sponsored health
insurance for individuals who lose access due to changes in their work or family status. Under
Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA, P.L. 99-272),
a private sector employer with 20 or more employees who offers health insurance to its
employees must also offer continued health insurance coverage at group rates to qualified
employees and their families faced with a loss of coverage due to qualifying events.6 State and
local workers are also covered by COBRA. These qualifying events include both voluntary and
involuntary termination of employment or a reduction in hours, as well as other statutorily
defined events.7
An eligible beneficiary must elect COBRA coverage within an election period, defined as 60 days
from the later of two dates: the date coverage would be lost due to the qualifying event, or the
date that the beneficiary is sent notice of his right to elect COBRA coverage. Prior to ARRA,
employers were permitted to charge the covered beneficiary 100% of the premium (both the
portion paid by the employee and the portion paid by the employer, if any), plus an additional 2%
administrative fee. In general, the continued coverage for the employee and the employee’s
spouse and dependent children must continue for 18 months and in certain circumstances may be
extended according to statutory limits.
However, not all individuals who lose their jobs have access to COBRA. For example, firms with
fewer than 20 employees are exempt from COBRA. Additionally, firms that do not provide access
to health insurance to current employees (including those that previously provided access but
went out of business) are not required to provide access to COBRA coverage. Among those
individuals with access to COBRA, the cost of the COBRA premiums may be prohibitive. Since
most employers subsidize health insurance premiums for their workers, the 102% COBRA
premium may not be affordable for the unemployed, especially when compared to unemployment
compensation. In 2008, an average COBRA premium was about $400 per month for individual
coverage ($4,798 annually) and $1,078 per month for family coverage ($12,934 annually).8
Average weekly unemployment benefits were $297 in 2008. 9 When converted to a monthly basis
of $1,237 a month, these premiums may consume a large share of one’s monthly unemployment
benefits, especially for those purchasing family coverage. These premium costs are most likely
the reason for low COBRA participation. According to surveys of the unemployed eligible for
COBRA, the participation rate ranges from 18 to 26% (or about 1 in 4 workers).10
6 See CRS Report R40142, Health Insurance Continuation Coverage Under COBRA, by Janet Kinzer.
7 Spouses and dependent children can also experience qualifying events leading to their loss of health insurance
coverage due to the death of the covered employee, divorce or legal separation from the employee, the employee’s
becoming eligible for Medicare, and the end of a child’s dependency under a parent’s health insurance policy.
Additionally, when an individual retires, there are also opportunities for COBRA coverage.
8 CRS estimate based on data from Kaiser Family Foundation, Worker and Employer Contributions for Premiums,
Employer Health Benefits 2008 Annual Survey.
9 CRS estimate based on average weekly unemployment compensation for 2008 of $297 from Department of Labor,
Employment and Training Administration, Unemployed Insurance Data Summary for 2008.
10 Spencer’s Benefits Reports, 2006, COBRA Survey: More Were Eligible, More Elected, Cost Was 145% of Active
(continued...)
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Health Insurance Premium Assistance for the Unemployed: ARRA 2009
Additionally, although federal employees are not covered under COBRA, they are entitled to
temporary continuation of coverage (TCC) under the Federal Employees Health Benefits
Program (FEHB). Finally, some state laws expand on COBRA protections, covering those who
would otherwise not be eligible under federal law (e.g. employees of firms with fewer than 20
workers).
COBRA Premium Subsidies Provided in ARRA
ARRA helps to mitigate the financial barriers of COBRA coverage to unemployed workers
through temporary subsidies of COBRA premiums. Under Title III of ARRA, a 65% subsidy is
available for up to 9 months to those individuals who meet the income test and whose qualifying
event is based on involuntary termination occurring on or after September 1, 2008, and before
January 1, 2010. 11 The premium subsidy will be available for coverage beginning on or after the
date of enactment of this act (February 17, 2009), but will not retroactively pay premiums for
COBRA coverage prior to enactment. The subsidy is available for up to 9 months, but may end
sooner if the COBRA eligibility period ends or if the individual has access to other group health
insurance. ARRA does not, however, modify the length of time that an individual may be covered
under COBRA.
There will also be a special extended enrollment period for two groups that were involuntarily
terminated from their employment on or after September 1, 2008. These groups are:
• individuals who did not elect COBRA coverage at the time; and
• individuals who had chosen COBRA coverage after September 1, 2008, but
dropped their coverage because they could not afford the premiums.
For these two groups, coverage shall commence on the first day of the first COBRA coverage
period beginning after the date of enactment (March 1, 2009, for health plans using calendar
months as the period of coverage). Eligible individuals are to be notified by their former
employer within 60 days12 and will have an additional 60 days after being notified to elect
COBRA and receive the subsidy.13 Their 35% premium will be charged retroactively to March 1,
2009.
(...continued)
Employee Cost (Chicago: CCH a Wolters Kluwer Company, 2006).
11 The statute does not define “involuntary termination of the covered employee’s employment.” In some cases it will
be clear that an employee was involuntarily terminated, but in other cases such a determination may not be obvious, as
in the case of a constructive discharge, participation in voluntary termination programs, or mutual agreement of the
employer and employee to terminate employment. An employee who leaves a job because of illness or disability
might have difficulty showing that he or she was “involuntarily terminated.” The Department of Labor is expected to
issue guidance on implementation of this provision.
12 The Secretary of Labor, Secretary of the Treasury, Secretary of Health and Human Services and the Office of
Personnel Management have 30 days after enactment to develop model notices.
13 Additionally, the 60-day period required for election of COBRA coverage following the qualifying event (which may
be different than the 60-day period following notification of eligibility for the subsidy) and the 63-day pre-existing
condition exclusion will be waived. Generally, coverage of a pre-existing medical condition may be limited or excluded
for up to 12 months for those who enroll in a health plan when first eligible to enroll. Individuals who meet the
limitation period requirements and do not experience a lapse of 63 or more days, are not subject to pre-existing
condition limitations when they switch to a new plan.
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Health Insurance Premium Assistance for the Unemployed: ARRA 2009
The ARRA also allows employers to permit eligible individuals the right to elect a different plan
offered by their former employer, within 90 days of their notification for the subsidy. Among
other restrictions, the premium for the plan cannot exceed the premium for coverage in which the
individual was enrolled at the time of the qualifying event.
Individuals receiving the subsidy are required to pay no more than 35% of their COBRA
premium.14 The remaining 65% is paid by their former employer, who will be reimbursed through
either: (1) a credit against any tax liability for payroll taxes, or (2) if the premium subsidy exceeds
their tax liability, a refund. The law envisions that some assistance-eligible individuals may
temporarily have to pay the full premium (allowing time for implementation of the law) and will
then either be reimbursed or provided with a credit toward future premiums. The subsidy will not
be considered income or resources for determining eligibility for any other public benefit and will
not be counted as gross income for tax purposes.
For individuals who had been paying the full COBRA premium prior to ARRA and are now
eligible to receive the subsidy, subsidy payments begin no earlier than February 17, 2009 (the
date of enactment). However, because it is likely that a plan administrator will not be able to
provide timely notification of the reduced amounts, the eligible individual may have to continue
to pay the full COBRA premium and will be refunded in later periods.
The full subsidy is available for individuals whose modified adjusted gross income (AGI) during
the tax year is no more than $125,000 for single filers (or $250,000 for joint filers). The subsidy
is phased-out for higher income individuals with a reduced subsidy for individuals with modified
AGI less than $145,000 for single filers (and $290,000 for joint filers). If individuals receive the
subsidy and their income exceeds the levels specified above, the amount of the subsidy will be
recaptured when they file their income taxes. To avoid recapture they may waive their rights to
the subsidy and still enroll in COBRA and pay the full premium. However, waiving their right is a
permanent decision, and they would not be allowed to take the subsidy in the future.
Employers and plan administrators will face a number of administrative issues in complying with
the subsidy provisions. These include sending notices of eligibility to former employees within
the specified time period. The Department of Labor is to issue a model notice regulation by
March 19, 2009. Further, repayment of the subsidy from the federal government will take the
form of a refundable tax credit and will offset the employer’s payroll tax liability. If their payroll
tax liability is less than their subsidy payments they will be reimbursed the difference. To ensure
timely repayment from the federal government, employers must both document and report their
subsidy payments accurately. The Treasury Department will issue guidance on documentation and
reporting requirements as soon as possible.
Specific provisions for COBRA subsidies are detailed in Table 1. Additionally, these subsidies
are also available to employees of the federal and state governments, and employees in states who
provide comparable COBRA coverage for otherwise excluded workers.
14 The COBRA premium may be up to 102% of the active worker premium paid.
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Health Insurance Premium Assistance for the Unemployed: ARRA 2009
Table 1. Specific Provisions For COBRA Subsidies in ARRA 2009 (P.L. 111-5)
Category Specific
Provisions
Eligibility for Subsidy – “assistance eligible individuals”
Eligible individuals are involuntarily unemployed between
September 1, 2008, and December 31, 2009, with household
modified adjusted gross income less than or equal to $125,000 for
singles and $250,000 for joint filers. Households with income up
to $145,000 for singles and $290,000 for joint filers will receive
some share of the subsidy.
Eligible individuals include those eligible for COBRA, as well as
Federal, state, and local workers. State mini-COBRA programs for
small businesses are also eligible for the subsidy.
Special Extended Enrollment Period
There is a special extended enrollment period for individuals
involuntarily unemployed on or after September 1, 2008, but who:
(1) did not choose COBRA coverage prior to date of enactment,
or (2) who chose COBRA coverage but dropped it because they
could not afford premiums. These groups will have the
opportunity to re-enroll and receive the subsidy. Their former
employer is to notify them of their eligibility for the COBRA
subsidy within 60 days of enactment.
State mini-COBRA programs have the option to extend the
subsidy to those eligible under the special enrollment period.
Effective Date of Subsidy
Subsidy is effective on February 17, 2009.
The subsidy payment is not retroactive for COBRA enrollees
prior to February 17, 2009.
Length and Amount of Subsidy
The subsidy equals 65% of the COBRA premium for 9 months
from date of first receiving subsidy or end of COBRA coverage,
whichever is earlier.
Interaction with Other Federal and State Programs
Premium subsidies are not to be considered additional income or
resources in determining eligibility for other programs (such as
Medicaid, SSI).
Dependent Coverage
Dependents covered under the worker’s plan on the day before
the qualifying event would also be qualified beneficiaries for
COBRA and would be eligible for the subsidy.
Tax Treatment of Subsidy to Eligible Individuals
The subsidy is not included in gross income.
Subsidy Repayment to Employers or Plan Administrators
A refundable tax credit against payroll taxes will be available to
employers or plan administrators. The Treasury department will
develop documentation and reporting requirements.
Appeal Process
An individual who is denied a COBRA subsidy by a group health
plan may request an expedited review of such denial by the
Department of Labor. Employers may also be required to
provide an attestation of involuntary termination of employment
for each covered employee for whom the subsidy is claimed.
Source: Congressional Research Service
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Health Insurance Premium Assistance for the Unemployed: ARRA 2009
Health Coverage Tax Credit for the Unemployed
Prior to the passage of ARRA, the health coverage tax credit (HCTC) covered 65% of the cost of
qualified health insurance coverage for eligible taxpayers and their family members.15 To claim
the HCTC, taxpayers must have been in one of three eligibility categories and not enrolled in (or
sometimes even eligible for) certain types of health insurance. The two groups of unemployed
eligible to claim the HCTC were:16
• individuals who received income support in the form of trade readjustment
allowances under the Trade Adjustment Assistance (TAA) program, including
persons eligible for, but not yet receiving, the allowance because they have not
yet exhausted their state unemployment benefits;17 and
• individuals who received wage subsidies in the form of alternative trade
adjustment assistance allowances.
These are individuals who lost manufacturing jobs due to international trade or shifts in
production outside the United States and were part of a group of workers that received TAA
certification from the Department of Labor. Eligible taxpayers were allowed to apply the HCTC
only to qualified health insurance options specified in the authorizing statute. The HCTC was
refundable, so taxpayers could claim the full credit amount even if they had little or no federal
income tax liability. Taxpayers could receive the HCTC in the form of advance payments, so they
did not need to wait until they filed their tax returns in order to benefit from the credit. Despite
these features, the HCTC has not been widely used. According to a number of surveys, between
12% and 15% of those eligible used the credit.18 Possible reasons to explain the relatively low
participation rate include barriers to finding qualified insurance and difficulties paying the 35% of
the premium not covered by the tax credit.
Health Coverage Tax Credit Provisions for Unemployed in ARRA
ARRA includes a number of provisions that modify the HCTC program for the unemployed
under TAA. These changes affect the HCTC subsidy rate, availability of payments, eligibility, and
qualified insurance. ARRA enacted the following changes to apply to the HCTC program through
December 31, 2010:
• Increases the subsidy rate from 65% to 80% of the cost of qualified health
insurance;
15 See CRS Report RL32620, Health Coverage Tax Credit, by Bernadette Fernandez.
16 Individuals between the ages of 55 and 64 who received payments from the Pension Benefit Guaranty Corporation
(PBGC) are also eligible for the HCTC.
17 See CRS Report RS22718, Trade Adjustment Assistance for Workers (TAA) and Reemployment Trade Adjustment
Assistance (RTAA), by John J. Topoleski.
18 Stan Dorn, Health Coverage Tax Credits: A Small Program Offering Large Policy Lessons, Urban Institute,
February 2008.
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Health Insurance Premium Assistance for the Unemployed: ARRA 2009
• Allows one or more retroactive payments to be made to eligible taxpayers to
cover costs incurred during the time the U.S. Treasury takes to certify HCTC
eligibility and make the first advance payment;
• Modifies the definition of an “eligible TAA recipient” to include persons who
receive unemployment compensation but are not enrolled in training, and
individuals who would be eligible for a trade readjustment allowance except that
they are in a break in training that exceeds a specified time period;
• Amends the provisions relating to HCTC eligibility of family members by
allowing such members to continue to receive the HCTC for up to two years after
any of the following events occur: the qualified individual becomes eligible for
Medicare, the taxpayer and spouse are divorced, or the taxpayer dies; and
• Expands the types of qualified health insurance to include health plans funded by
voluntary employees’ beneficiary associations.
ARRA also broadens eligibility criteria for TAA assistance (which, in turn, expands HCTC
eligibility) to include service sector and public agency workers who lost their jobs for trade-
related reasons.
Potential Impact of ARRA Provisions on the
Unemployed
Whether the unemployed will benefit from the premium assistance provisions in ARRA depends
on their individual circumstances. Although some are involuntarily terminated and lose their
employer-sponsored health insurance when they lose their jobs, others were terminated but did
not have employer-sponsored coverage to begin with. Some may have voluntarily left their jobs
to explore other opportunities or to care for family members or may be just entering the
workforce and have not yet found a job. For those unemployed without health insurance coverage
they either rely on spouses and family members, purchased insurance in the individual market, or
are uninsured. Nearly half of the unemployed (42%) reported being uninsured in 2007.19
The COBRA subsidy and HCTC are expected to have the following potential impact on the
unemployed:
• approximately 7 million workers and their dependents are expected to use the
COBRA subsidy under ARRA over the next year, at a three-year cost of $25
billion;20
• the COBRA subsidy is estimated to affect 51% of those who involuntarily lost
their jobs this year;
• estimates from the Joint Committee on Taxation project that spending for the
HCTC expansion is expected to be $457 million over the same time period,
which is about 2% of COBRA subsidy costs.21
19 CRS analysis of the March 2008 Supplement of the Current Population Survey, Bureau of Census.
20 Congressional Budget Office, Letter to Nancy Pelosi dated February 9, 2009. Cost estimates from Joint Committee
on Taxation.
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Potential Impact of COBRA Subsidy on the Unemployed
As noted earlier, to be eligible for the COBRA subsidy, the unemployed must be involuntarily
terminated and have had employer health insurance from their prior employers.22 These include
government workers. Further, they must have modified AGI of no more than $145,000 for single
filers and $290,000 for joint filers in the year they receive the subsidy.
Involuntary Terminations
Based on February 2009 data from Bureau of Labor Statistics (BLS), about 50% of the
unemployed are involuntarily terminated, but not all of them had employer-sponsored health
insurance coverage prior to losing their jobs. Data on the insurance status of current unemployed
is not available. However, one way to estimate this percent is to first identify the likelihood of
those employed by industry having coverage in their own names. Using the most recent data23 on
provision of employer-sponsored insurance status by industry for 2007, Table 2 shows the
likelihood of the current unemployed having health insurance status when they were employed.
• The majority (72%) had previously worked in manufacturing, retail, construction,
professional and business services, leisure and hospitality as of February 2009.
• Workers in the manufacturing and information sectors have the highest likelihood
of having health insurance from their previous employer.
• Workers in the leisure and hospitality, construction, and wholesale and retail
trade sectors were less likely to have health insurance from their previous
employer prior to being laid off.
(...continued)
21 Joint Committee on Taxation, Estimated Budget Effects of the Revenue Provisions Contained in the Conference
Agreement for H.R. 1, The American Recovery and Reinvestment Tax Act of 2009, February 12, 2009.
22 See CRS Report R40165, Unemployment and Health Insurance: Current Legislation and Issues, by Janemarie
Mulvey and Bob Lyke, for more information on share of workers with employer-sponsored coverage by industry.
23 The March 2008 Current Population Survey was used. Although this is a widely-used data source for health
insurance coverage there could be some under-reporting of health insurance coverage.
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Table 2. Industry Characteristics of Unemployed and the Likelihood of Having
Employer-Sponsored Coverage, By Industry
Share of
Unemployed by
Likelihood of Having Employer
Industry, February
Sponsored Insurance Coverage
Industry
2009
in Their Own Names, 2007
Government 4.7%
82%
Manufacturing 15.1%
69%
Mining
0.5%
71%
Information 1.9%
67%
Transportation /Utilities
4.7%
63%
Financial Activities
5.3%
61%
Education and Health
7.0% 60%
Services
Professional and
12.6% 49%
Business Services
Wholesale/ Retail Trade
15.3%
47%
Construction 16.8%
40%
Leisure and Hospitality
12.3%
28%
Other Services
3.8%
32%
Total
100%a 51%b
Source: Unemployment data derived from BLS, Employment Situation, February 2009, Table A-11: Unemployed
Persons by Industry. Likelihood of having employer-sponsored coverage and percent uninsured estimated by CRS
using March 2008 Supplement to Current Population Survey.
a. Total may slightly exceed 100% due to rounding.
b. This represents a weighted-average of unemployment by industry (as of February 2009) weighted by the
likelihood of having employer-sponsored coverage from the March 2009 Current Population Survey.
Applying these probabilities to the current unemployed by industry results in an estimate of 51%
of those involuntarily terminated most likely having employer-sponsored coverage prior to
termination and, thus, most likely eligible for the COBRA subsidy.24 Given these caveats, as of
February 2009, about 26% of the total unemployed are potentially eligible for the COBRA
subsidy (see Figure 1). Within this group, a small share may not qualify because their income
exceeds $145,000 for single and $290,000 for joint filers. Although it is difficult to predict how
many of those eligible will be disqualified due to income thresholds, it is most likely to be a small
share given the current income distribution of the population. The Internal Revenue Service (IRS)
data does not provide the share of tax units above these specific income thresholds. However, it
does show that 2.9% of single filers, regardless of employment status, had adjusted gross income
over $100,000 in 2006. For joint filers, 6.4% had adjusted gross income over $200,000 regardless
of employment status. Given that the income limits for the COBRA subsidy are in the mid- to
upper-range of these income categories and households with an unemployed member may have
24 Based on unemployment data from Bureau of Labor Statistics as of February 2009.
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lower incomes than those without, the share of households disqualified due to the $145,000 single
and $290,000 joint filers is likely to be much smaller than the 2.6% or 6.4% reported above.
Figure 1. Characteristics of Unemployed
As of February 2009
Temporarily
Involuntary w/Prior
Furloughed
Coverage*
12.0%
25.6%
New Entrants to
Labor Force
8.1%
Re-Entrants to Labor
Force
22.9%
Involuntary w/out
Voluntary
Prior Coverage*
Terminations
24.6%
6.6%
Source: CRS Estimates based on data from Bureau of Labor Statistics on Employment Situation, February 2009.
* Estimates of whether those who were involuntarily terminated had prior health insurance coverage based on
the likelihood of having employer-sponsored coverage in 2007 (latest year data is available).
Temporarily Furloughed
In addition to the 50% of total unemployed that have been involuntarily terminated, about 12% of
the unemployed were temporarily furloughed (see Figure 1). There is no reliable data on whether
employees who are temporarily furloughed also lose their health insurance coverage or not. In
addition, some share of them may not have had employer-sponsored coverage to begin with.
Further complicating the analysis is that since “involuntarily unemployed” has not been well-
defined it is uncertain whether a temporary furlough would meet the definition and be eligible for
the COBRA subsidy.25
25 See footnote 11.
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Health Insurance Premium Assistance for the Unemployed: ARRA 2009
Other Unemployed
The remaining 38% of the unemployed are not likely to be eligible for the COBRA subsidy for
the following reasons:
• About 6.6% voluntarily left their employers. Although they are eligible for
COBRA they would have to pay the full 102% of the premium.
• Nearly one-third of the unemployed are just entering the labor force either for the
first time (8.1%) or re-entering after being out for some time (22.9%).26 They
most likely include family caregivers returning to work, retirees returning to
work to supplement their income in the “down” economy, or those returning after
an extended illness.
Potential Impact of Health Coverage Tax Credit
As noted earlier, eligibility for the HCTC was expanded to service-sector and public-agency
workers who lost their jobs due to trade-related reasons. The amount of the credit was increased
to 80% for all HCTC-eligible recipients. Estimating how this will impact the unemployed is
difficult given limited data on trade-affected workers, especially in the context of the current
economic recession.
A few studies have estimated the impact of expanding the HCTC to service-sector workers at
potentially about 250,000 workers potentially per year.27 However, these estimates do not reflect
the current economic recession which is characterized by significant declines in consumer
demand for goods and services worldwide, not just in the United States. The downturn, by itself,
would not increase TAA eligible workers, who lose their job for trade-related reasons. As a result,
earlier estimates are not reliable given the changing economic environment.28
Further complicating estimates of HCTC under ARRA are historically low participation rates.
Studies have shown that despite a tax credit of 65% prior to the enactment of ARRA, the share of
individuals who are eligible and actually participate is about 15%. While an increase in the credit
to 80% can help to improve affordability, other issues such as complex enrollment, payment of
full premium in advance, and limited coverage of state health plans have led to low participation
rates. 29 These may not change under ARRA.
26 If an individual were involuntarily unemployed on or after September 1, 2008, and stopped looking for work for a
while, they potentially could still be eligible for the COBRA subsidy if their prior employer provided health insurance
coverage.
27 For more information about these studies see CRS Report RL32292, Offshoring (a.k.a. Offshore Outsourcing) and
Job Insecurity Among U.S. Workers, by Linda Levine.
28 An economic downturn could also potentially increase pension plan terminations and thus increase the number of
PBGC pensioners eligible for the HCTC.
29 Stan Dorn, Health Coverage Tax Credits: A Small Program Offering Large Policy Lessons, Urban Institute,
February 2008.
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Health Insurance Premium Assistance for the Unemployed: ARRA 2009
Other At-Risk Groups Not Covered by ARRA
In addition to those who are considered officially unemployed, other at-risk groups are not
eligible for the premium assistance provisions in ARRA. These groups include involuntary part-
time workers and discouraged workers. Both groups may have lost health insurance coverage due
to changes in work status.
Involuntary Part-Time Workers
Involuntary part-time workers are individuals who wanted to work full-time but instead had to
work part-time.
• The number of involuntary part-time workers has nearly doubled over the past
year to 8.6 million.
• Part-time workers are about twice as likely to be uninsured (26%) as compared to
full-time workers (13%).30 Although a small share of part-time workers may be
eligible for the HCTC if they are receiving unemployment compensation, this
varies widely by state.
Involuntary part-time workers report two primary reasons for not working full-time:31
• Slack work (a reduction in hours in response to unfavorable business conditions).
This is the reported reason for 75% of involuntary part-time workers.
• Economic reasons are preventing 20% of involuntary part-time workers from
finding full-time employment.
Discouraged Workers
Another group that raises concerns with respect to health insurance coverage are discouraged
workers—persons not currently looking for work because they believe jobs are not available for
them. As of February 2009, there were 731,000 discouraged workers. This number has more than
doubled over the past year. 32
30 EBRI. Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2008 Current
Population Survey, September 2008.
31 BLS, Employment Situation, February 2009, Table A-1: Employed Persons by Class of Worker and Part-Time
Status.
32 BLS, Employment Situation, February 2009, Table A-13: Persons Not in the Labor Force.
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Health Insurance Premium Assistance for the Unemployed: ARRA 2009
Author Contact Information
Janemarie Mulvey, Coordinator
Bernadette Fernandez
Specialist in Aging Policy
Analyst in Health Care Financing
jmulvey@crs.loc.gov, 7-6928
bfernandez@crs.loc.gov, 7-0322
Hinda Chaikind
Specialist in Health Care Financing
hchaikind@crs.loc.gov, 7-7569
Acknowledgments
The authors would like to thank Bob Lyke, Kathleen Swendiman, John Topoleski and Janet Kinzer for their
contributions to this report.
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