Unemployment and the Availability of Health Insurance: Issues for Congress
Congressional research reportApr 10, 2012
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Unemployment and the Availability of Health
Insurance: Issues for Congress
-name redactedAnalyst in Health Care Financing
April 10, 2012
Congressional Research Service
7-....
www.crs.gov
R40165
CRS Report for Congress
Prepared for Members and Committees of Congress
Unemployment and the Availability of Health Insurance: Issues for Congress
Summary
When workers lose their jobs, they can also lose their health insurance. If that health insurance is
family coverage, then a worker’s family members can also become uninsured. For individuals
who do not typically use many health care services, loss of insurance might have little impact.
However, for individuals who have health problems or who are injured, loss of coverage can be
serious. Without insurance, individuals often have difficulty obtaining needed care and problems
paying for the care they receive. Unemployed individuals and their family members who cannot
postpone care may incur large bills that create or add to financial distress. With the Congressional
Budget Office expecting the unemployment rate to remain above 8.0% through 2014, retaining or
obtaining health insurance may continue to be difficult for the unemployed and their family
members.
The 111th Congress passed legislation that temporarily addressed part of this problem through a
temporary premium subsidy for health insurance coverage through Title X of the Consolidated
Omnibus Budget Reconciliation Act of 1985 (COBRA, P.L. 99-272). COBRA generally requires
certain employers to provide employees and their families the right to continue participation in
the employer’s health plan in the case of certain events, including involuntary dismissal. To
continue coverage, workers must pay both the employee’s and the employer’s share of the
premium, plus a 2% administrative fee. The premium subsidy that reduced the cost of COBRA
coverage for certain individuals who lost their jobs expired on May 31, 2010.
The Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended) is intended to
expand access to health insurance coverage. Some ACA provisions made immediate market
reforms to increase consumer access to health insurance, particularly for young adults, individuals
with preexisting conditions, and other, higher-risk groups. For example, one provision of the ACA
generally allowed dependents up to age 26 to remain eligible for insurance coverage through their
parents’ plans, which could help the younger unemployed. Some other provisions of the ACA that
increase access to coverage do not become effective until 2014, however. Those provisions
include expansion of Medicaid to those with modified adjusted gross income (MAGI) up to 133%
of the federal poverty level (FPL) and insurance premium credits and subsidies for individuals
and families with MAGI below 400% FPL.
Currently, certain individuals cannot benefit from the expanded access to coverage under the
ACA because either the provisions do not apply to them or because applicable provisions have
not yet taken effect. These individuals could include unemployed individuals and their family
members. This report examines access to health insurance coverage among the unemployed
population and provides information and analysis to inform the congressional debate on this
issue. The report is divided into five parts: (1) analysis showing the diversity of the unemployed
population, (2) analysis showing the relationship between unemployment and loss of employersponsored health insurance, (3) analysis of certain unemployed individuals at-risk for being
uninsured, (4) summaries of current federal programs and tax treatments that can help some
unemployed individuals (and their families) obtain or retain health insurance, and (5) additional
options that might be considered, including extending the COBRA eligibility period and allowing
unemployed individuals under age 65 to “buy-in” to Medicare—that is, to pay premiums to join
Medicare before they reach age 65.
Congressional Research Service
Unemployment and the Availability of Health Insurance: Issues for Congress
Contents
Introduction...................................................................................................................................... 1
Diversity of the Unemployed Population ........................................................................................ 2
Age ............................................................................................................................................ 2
Marital Status and Gender ......................................................................................................... 3
Duration of Unemployment ....................................................................................................... 4
Health Status .............................................................................................................................. 5
Income ....................................................................................................................................... 5
The Relationship Between Unemployment and Loss of Employer-Sponsored Insurance .............. 7
Employer-Sponsored Health Insurance by Industry: Implications for the Unemployed ........... 8
Health Insurance Coverage for Those Entering the Labor Force .............................................. 9
Other At-Risk Groups ...................................................................................................................... 9
Involuntary Part-Time Workers ................................................................................................. 9
Discouraged Workers............................................................................................................... 10
Current Programs That Assist Some Unemployed with Health Insurance .................................... 10
COBRA ................................................................................................................................... 10
Health Coverage Tax Credit .................................................................................................... 11
Medicaid .................................................................................................................................. 12
Itemized Deduction for Medical Expenses .............................................................................. 12
Health Savings Accounts ......................................................................................................... 13
The Affordable Care Act and the Unemployed.............................................................................. 14
Issues for Congress ........................................................................................................................ 15
Extending COBRA .................................................................................................................. 16
Extend the Eligibility Period for COBRA Premium Subsidy ........................................... 16
Extend Eligibility Period for Receiving COBRA Beyond 18 Months .............................. 17
Medicare Expansion ................................................................................................................ 17
Figures
Figure 1. Characteristics of the Unemployed, by Gender, Marital Status, and Presence of
Children in Household, December 2011....................................................................................... 4
Tables
Table 1. Unemployment Rate and Distribution of Unemployed, by Age ........................................ 3
Table 2. Percentage Reporting Perceived Health Status, by Age ..................................................... 5
Table 3. Unemployment Compensation Benefits, by Household Income, 2009 ............................. 6
Table 4. Employer-Sponsored Insurance Coverage of Workers, by Selected Industry.................... 8
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Unemployment and the Availability of Health Insurance: Issues for Congress
Contacts
Author Contact Information........................................................................................................... 18
Acknowledgments ......................................................................................................................... 18
Key Policy Staff ............................................................................................................................. 18
Congressional Research Service
Unemployment and the Availability of Health Insurance: Issues for Congress
Introduction
One consequence of unemployment is that individuals and their family members can lose their
health insurance. Loss of insurance may have little impact on individuals who do not use many
health care services. However, for those who have health problems or who are injured, loss of
coverage can be serious. Without insurance, individuals often have difficulty obtaining needed
care and have problems paying for the care they receive. Unemployed individuals and their
family members who cannot postpone care may incur large bills that create or add to financial
distress.1
Some of the unemployed and/or their family members will be eligible for Medicaid coverage.
Others may be able to obtain insurance through a spouse or parent or by paying Consolidated
Omnibus Budge Reconciliation Act (COBRA) premiums, though the cost of COBRA premiums
can be prohibitive.2 The Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as
amended) is intended to improve access to health insurance coverage, but it does not necessarily
provide immediate access to coverage for unemployed individuals and their family members.
Some provisions of the ACA that improve access to care have been implemented, but they apply
to specific populations (e.g., individuals with preexisting conditions). Other provisions of the
ACA that more broadly apply to individuals, including unemployed individuals (e.g., health
insurance exchanges), will generally not be implemented until 2014. This results in an interim
period when unemployed individuals may have few health insurance options and/or lack the
resources to pay for insurance.
Concern about unemployment and health insurance has grown because of the recent economic
recession and the jobless recovery.3 In December 2011, the nation’s unemployment rate was 8.5%
(about 13.1 million individuals), whereas the underemployment rate, which includes individuals
who are working part-time because their hours have been cut and other individuals who have
given up looking for jobs, reached 15.2% (about 23.4 million individuals).4 The Congressional
Budget Office (CBO) expects the unemployment rate to remain above 8.0% through 2014,5
indicating that the impact of unemployment on health insurance is likely to continue for some
time to come.
This report contains information and analysis intended to inform congressional debate over
whether to address these issues, and if so, how, and to what extent. It is divided into five parts:
1. analysis showing the diversity of the unemployed population;
1
The Commonwealth Fund, Losing Ground: How the Loss of Adequate Health Insurance is Burdening Working
Families, August 2008.
2
Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA, P.L. 99-272) generally requires
certain employers to provide employees and their families with the right to continue participating in the employer’s
health plan in the case of certain events, including involuntary dismissal. To continue coverage, workers must pay both
the employee’s and the employer’s share of the premium, plus a 2% administrative fee.
3
The National Bureau of Economic Research (NBER) calculated that the recession began in December 2007 and ended
in June 2009. The NBER defines recession as a “significant decline in economic activity spread across the economy,
lasting more than a few months, normally visible in real Gross Domestic Product, real income, employment, industrial
production, and wholesale-retail sales”; http://www.nber.org/cycles.html.
4
Bureau of Labor Statistics (hereafter, BLS), The Employment Situation: December 2011, published January 6, 2012.
5
Congressional Budget Office (CBO), The Budget and Economic Outlook: Fiscal Years 2012 to 2022, January 2012,
http://www.cbo.gov/publication/42905.
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Unemployment and the Availability of Health Insurance: Issues for Congress
2. analysis showing the relationship between unemployment and loss of employersponsored health insurance;
3. analysis of certain unemployed individuals at risk for being uninsured;
4. summaries of current federal programs and tax treatments that can help some
unemployed individuals obtain or retain health insurance; and
5. additional options that might be considered.
Diversity of the Unemployed Population
The unemployed are a diverse population in terms of age, gender, marital status, income, and
other characteristics. These attributes indicate that they likely have differing health care needs and
different capacities to pay for care and insurance. This section describes the diversity of the
unemployed population, broken down by various demographic categories.
Age
Age can affect the probability that an individual will need health care services. One study finds
that adults aged 55 to 64 are more likely to have chronic conditions and are more likely to have
higher premiums and out-of-pocket costs compared to younger adults.6 Another study finds that
only one-fifth of an individual’s lifetime health care expenditures occur before age 41, while
nearly half accrue after age 65.7 As follows, the older unemployed will most likely incur greater
health care expenditures than the younger unemployed.
The age of an unemployed individual can also affect the availability of financial resources.
Younger unemployed individuals may have less savings to draw from compared to their older
counterparts. However, younger unemployed individuals may also be able to rely more on parents
for family assistance. For example, under the ACA, individuals under age 26 may be able to
qualify for dependent coverage through a parent’s health plan.8
Table 1 shows the unemployment rate by age group and the age distribution of the unemployed at
the beginning of the last recession in December 2007 and again in December 2011.
Unemployment rates have increased since 2007 across all age groups. While the unemployment
rates remain highest among individuals aged 16 to 19 and 20 to 24, the unemployment rates
increased the most between 2007 and 2011 among individuals aged 25 and older. For those aged
25 and over, unemployment rates nearly doubled across all age categories.
The distribution of the unemployed shows that since the start of the recession in December 2007,
unemployed individuals are increasingly older. In December 2011, the share of the unemployed
6
Jessica Vistnes, Philip Cooper, Didem Bernard, et al., Near-Elderly Adults, Ages 55-64: Health Insurance Coverage,
Cost, and Access, Agency for Health Care Policy and Research, Rockville, MD, May 2009, http://www.ahrq.gov/data/
meps/mepsneareld/nearelderly.pdf.
7
Berhanu Alemayehu and Kenneth E. Warner, “The Lifetime Distribution of Health Care Costs,” Health Services
Research, vol. 39, no. 3 (June 2004).
8
For more information on the dependent coverage provision in the ACA, see CRS Report R41220, Preexisting
Condition Exclusion Provisions for Children and Dependent Coverage under the Patient Protection and Affordable
Care Act (ACA), by (name redacted).
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Unemployment and the Availability of Health Insurance: Issues for Congress
population aged 16 to 24 declined compared to December 2007, while the share of the
unemployed aged 25 and older increased (from 66.3% in 2007 to 73.2% in 2011). Among those
aged 25 and older, the largest percentage point increase in the share of unemployed between 2007
and 2011 was among those aged 55 and older. 9
Table 1. Unemployment Rate and Distribution of Unemployed, by Age
Unemployment Rate
Age
Distribution of Unemployed
December 2007
December 2011
December 2007
December 2011
16 to 19
17.1%
23.1%
15.6%
10.0%
20 to 24
9.4%
14.4%
18.5%
17.0%
25 and older
3.9%
7.2%
66.3%
73.2%
25 to 34
4.9%
9.4%
21.4%
24.3%
35 to 44
3.8%
6.8%
17.5%
17.0%
45 to 54
3.6%
6.5%
16.7%
17.3%
55 and older
3.2%
6.2%
11.2%
14.7%
7.2%
8.5%
—
—
Total
Sources: BLS, Employment Situation December 2011. Table A-10: Selected Unemployment Indicators, Seasonally
Adjusted, published January 6, 2012; BLS, Employment Situation December 2008. Table A-7: Selected Unemployment
Indicators, Seasonally Adjusted, published January 4, 2008.
Marital Status and Gender
Figure 1 shows the unemployed population by marital status, gender, and the presence of
children in a household. The majority of the unemployed as of December 2011 were single men
(36.7%), followed by single women without children (20.6%). Married men comprised 17.8% of
the unemployed. Married women accounted for 14.9% of the unemployed, and single women
with children comprised 10.0%.
Marital status has a direct impact on the probability that an unemployed individual will continue
to be covered by health insurance, in some cases making it more likely that an unemployed
individual maintains access, and in other cases making it more likely that the unemployed
individual and his or her entire family will lose coverage. Individuals married to a spouse who
has a job and insurance coverage may be able to enroll in their spouse’s plan if they lose their
coverage. On the other hand, workers who are married (or who are the head of a household) may
be providing the main health insurance for their families. In 2010, about half of the nonelderly
with employer-sponsored coverage received that coverage as a dependent (i.e., as a spouse,
partner, or child of an individual with employer-sponsored coverage).10 A single parent who is the
9
When workers retire, they exit the labor force and are no longer counted as participating in the labor force. One
explanation for the increase in unemployed individuals aged 55 and older is that uncertainty in the economy has
encouraged older workers to delay retirement and remain in the workforce. For more information, see CRS Report
R41557, Older Unemployed Workers Following the Recent Economic Recession, by (name redacted).
10
Paul Fronstin, Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2011
Current Population Survey, Employee Benefit Research Institute, Issue Brief No. 362, September 2011,
http://www.ebri.org/pdf/briefspdf/EBRI_IB_09-2011_No362_Uninsured1.pdf.
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Unemployment and the Availability of Health Insurance: Issues for Congress
head of household and unemployed is also at risk of losing employer-sponsored coverage for the
family. The unemployed and/or their dependents may, however, be eligible for public assistance
through Medicaid (see the discussion on “Medicaid” below) or the State Children’s Health
Insurance Program (CHIP).11
Figure 1. Characteristics of the Unemployed, by Gender,
Marital Status, and Presence of Children in Household, December 2011
Married Men
17.8%
Single Men
36.7%
Married Women
14.9%
Single Women with
Children
10.0%
Single Women no
Children
20.6%
Source: BLS, Employment Situation, December 2011, Table A-10: Selected Unemployment Indicators, Seasonally
Adjusted, January 6, 2012.
Duration of Unemployment
As of December 2011, 58.0% of unemployed individuals had been out of work for 15 weeks or
longer. Nearly 43.0% had been unemployed for more than six months in December 2011,
compared to 18.0% who were unemployed for more than six months when the recession began in
December 2007.12 Research suggests that the longer a person remains unemployed and uninsured,
the greater the delay in seeking medical treatment (see discussion on “Health Status” below).13
11
Children’s eligibility for Medicaid and CHIP is not dependent on whether a child lives in a one- or two-parent
household; children in two-parent households may also qualify for Medicaid and CHIP. For more information about
Medicaid and CHIP, see CRS Report RL33202, Medicaid: A Primer, by (name redacted), and CRS Report R40444,
State
Children’s Health Insurance Program (CHIP): A Brief Overview, by (name redacted) and (name redacted).
12
For a more detailed discussion on the long-term unemployed see CRS Report R41559, The Trend in Long-Term
Unemployment and Characteristics of Workers Unemployed for More than 99 Weeks, by (name redacted).
13
The Commonwealth Fund, Losing Ground: How the Loss of Adequate Health Insurance is Burdening Working
Families, August 2008.
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Unemployment and the Availability of Health Insurance: Issues for Congress
Health Status
The health status of the unemployed could be affected by whether they have health insurance
coverage, their demographic composition, and the duration of their unemployment. As noted
earlier, the unemployed today tend to be older than at the beginning of the recession in December
2007, and health expenditures are typically greater for older compared to younger populations.
Some research shows that age and health status are strongly correlated, indicating that because
the unemployed are older, they may also be less healthy.14
Table 2 presents data by perceived health status by age (regardless of employment status). In all
age groups, around 30.0% of the population reports very good health. However, compared with
individuals aged 18 to 24, individuals aged 45 to 64 are more than twice as likely to report fair
health and over six times more likely to report poor health. Compared to individuals aged 25 to
44, individuals aged 45 to 64 are about twice as likely to report fair health and more than three
times more likely to report poor health.
Table 2. Percentage Reporting Perceived Health Status, by Age
Perceived Health Status
Age
Excellent
Very
Good
Good
Fair
Poor
18 to 24
41.8%
33.7%
18.6%
5.1%
0.8%
25 to 44
29.7%
35.4%
26.7%
6.7%
1.5%
45 to 64
21.7%
31.2%
29.5%
12.4%
5.2%
Source: The 2008 Medical Expenditure Panel Survey.
As noted earlier, the unemployed today are more likely to have been unemployed for longer than
six months, which may further delay necessary medical treatment. One study shows that more
than 70.0% of adults with gaps in health care coverage tend to forgo needed care because of cost,
up from just over half in 2001.15 Uninsured adults are also less likely than those with insurance to
obtain tests such as blood pressure, cholesterol, and cancer screening.16 These problems may be
further exacerbated among the older unemployed and/or those with longer durations of
unemployment.
Income
Individuals who become unemployed may be eligible for unemployment compensation (UC).
Eligibility, benefit amount, and duration of UC is determined by each state.17 Generally, UC
benefits are based on wages for covered work during a 12-month period. Most state benefit
14
Anne Case and Angus S. Deaton, “Broken Down by Work and Sex: How Our Health Declines,” in Analyses in the
Economics of Aging, ed. David A. Wise (University of Chicago Press, 2005), pp. 185-212.
15
The Commonwealth Fund, Losing Ground: How the Loss of Adequate Health Insurance is Burdening Working
Families, August 2008.
16
Ibid.
17
CRS Report RL33362, Unemployment Insurance: Programs and Benefits, by (name redacted) and (name redac
ted).
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Unemployment and the Availability of Health Insurance: Issues for Congress
formulas replace half of a claimant’s average weekly wage up to a weekly maximum. The
average regular UC benefit duration as of December 2011 was 17.5 weeks.18 Approximately 3.6
million individuals claimed regular state UC benefits in a given week in December 2011.19
Average weekly unemployment benefits were $291,20 translating to an average monthly benefit of
$1,261.
The availability of other forms of income for the unemployed is important in determining their
ability to pay for health insurance coverage or health care services directly out-of-pocket.
Unemployment compensation by itself could be insufficient to pay for these costs. For example,
among the unemployed whose only option is to purchase insurance in the individual market, the
cost of coverage could be prohibitive. In 2010, the average monthly cost of premiums for
coverage bought in the individual market was $301 for self-only coverage and $592 for family
coverage.21 Assuming premiums did not increase in 2011 (which is unlikely), the average
monthly cost of the premium for self-only coverage would consume 23.9% of the average
monthly unemployment benefit, and the average monthly cost of the premium for family
coverage would consume 46.9%.22
Data on the income distribution of those currently unemployed are not available. However, the
most recent data from the Internal Revenue Service show the number of returns with UC by
household income in 2009 (see Table 3). Individuals with household income of $15,000 up to
$20,000 are the most likely to have UC, with 11.6% of all returns reporting UC. Examining the
distribution of returns with UC by income, about 44% of those who received UC benefits had
household income below $25,000, while nearly 30% had household income of $50,000 or more.
Table 3. Unemployment Compensation Benefits, by Household Income, 2009
Returns with Unemployment Compensation
Number (in 1,000s)
% of All Returns in
Income Category
Distribution by
Income
Less than $10,000
1,256
5.0%
11.1%
$10,000 to under $15,000
1,286
10.3%
11.4%
$15,000 to under $20,000
1,323
11.6%
11.7%
$20,000 to under $25,000
1,119
11.2%
9.9%
$25,000 to under $30,000
839
9.7%
7.4%
Household Incomea
18
Department of Labor, Employment and Training Administration, Unemployed Insurance Data Summary for Fourth
Quarter 2011.
19
Data are for the week ending on or before December 10, 2011. U.S. Department of Labor, “Unemployment
Insurance Weekly Claims Report,” press release, December 29, 2011, http://www.workforcesecurity.doleta.gov/press/
2011/122911.asp.
20
Department of Labor, Employment and Training Administration, Unemployed Insurance Data Summary for Fourth
Quarter 2011.
21
Kaiser Family Foundation, Survey of People Who Purchase Their Own Insurance, June 2010, http://www.kff.org/
kaiserpolls/upload/8077-R.pdf. In the survey, “family coverage” is coverage for two or more individuals.
22
It should be noted that these percentages could vary greatly by state because each state determines the amount of its
unemployment benefit and the duration an individual may receive the benefit, and state-specific factors (e.g., state
health insurance mandates) affect the cost of health insurance premiums in the individual market.
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Unemployment and the Availability of Health Insurance: Issues for Congress
Returns with Unemployment Compensation
Household Incomea
Number (in 1,000s)
% of All Returns in
Income Category
Distribution by
Income
$30,000 to under $40,000
1,213
8.4%
10.7%
$40,000 to under $50,000
910
8.4%
8.1%
$50,000 to under $75,000
1,546
8.3%
13.7%
$75,000 to under $100,000
851
7.4%
7.5%
$100,000 and over
956
5.5%
8.5%
11,299
8.0%
—
Total
Source: CRS analysis of 2009 data from the Internal Revenue Service.
a.
Represents individual, couple, or family income where income is defined as adjusted gross income plus
statutory adjustments, tax-exempt interest, and nontaxable Social Security benefits.
The ability of the unemployed to purchase insurance depends on income from other sources in
addition to UC, current living expenses, and other factors, such as whether individuals in the
household have preexisting conditions that could significantly increase the cost of coverage.
Beyond UC, individuals also may draw down their savings (including retirement savings) to pay
for household expenses.
The Relationship Between Unemployment and Loss
of Employer-Sponsored Insurance
Employer-sponsored health insurance represents the largest source of coverage to workers and
their dependents. In 2010, about 68.0% of workers received employer-sponsored coverage from
an employer, either in their own names (51.0%) or as dependents of another family member’s
employer (17.0%).23 Among other factors, the nature of unemployment for an individual (i.e.,
whether an individual is permanently or temporarily laid off) and the industry in which an
individual had been employed can affect an individual’s likelihood of having employer-sponsored
coverage.
Those most likely to have lost employer-sponsored coverage are the nearly 6.4 million
unemployed who report that they have been permanently laid off from their jobs,24 comprising
nearly half (48.3%) of the 13.1 million unemployed workers as of December 2011. Another 1.4
million individuals (9.0% of the unemployed) have been temporarily laid off. These workers may
still have access to health insurance and other employer-provided benefits (if they were available
prior to their change in work status). About 900,000 individuals, 7.0% of the unemployed, left
their jobs voluntarily.25
23
Paul Fronstin, Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2011
Current Population Survey, Employee Benefit Research Institute, Issue Brief No. 362, September 2011,
http://www.ebri.org/pdf/briefspdf/EBRI_IB_09-2011_No362_Uninsured1.pdf.
24
BLS, Employment Situation, December 2011, Summary Table A-11: Unemployed Persons by Reason for
Unemployment, Published January 6, 2012.
25
Ibid. The remaining unemployed (about one-third of unemployed workers as of December 2011) are individuals who
(continued...)
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Unemployment and the Availability of Health Insurance: Issues for Congress
Employer-Sponsored Health Insurance by Industry:
Implications for the Unemployed
A closer look at the industry characteristics of the unemployed provides some insight into their
health insurance status prior to becoming unemployed. Individuals who had coverage prior to
becoming unemployed may be better able to maintain or obtain coverage while unemployed.26
Table 4 shows the percentage of workers with health insurance in their own names in each
industry in 2010, and the number of unemployed workers and the unemployment rate among
industries as of December 2011. Workers laid off in the mining and manufacturing sectors had the
highest likelihood of having health insurance through their previous employer. Workers laid off in
wholesale and retail trade, construction, and leisure and hospitality were the least likely to have
health insurance from their previous employer prior to being laid off. The industries with the
largest numbers of unemployed individuals are professional and business services, wholesale and
retail trade, construction, and leisure and hospitality. Combined, workers in these four industries
account for about 46.0% of all unemployed individuals.
Table 4. Employer-Sponsored Insurance Coverage of Workers, by Selected Industry
Share of Workers with
Employer-Sponsored
Insurance in Their Own
Name, 2010
Number of
Unemployed,
December 2011
(in 1,000s)
Unemployment
Rate, December
2011
Mining, Quarrying, Oil & Gas
Extraction
74.6%
59
6.9%
Manufacturing
69.9%
1,217
7.9%
Information
65.7%
235
7.7%
Transportation/Utilities
64.0%
399
7.0%
Financial Activities
63.5%
514
5.6%
Educational & Health Services
60.4%
1,201
5.5%
Professional & Business Services
51.4%
1,403
9.3%
Wholesale/Retail Trade
46.3%
1,701
8.2%
Construction
40.6%
1,327
16.0%
Leisure & Hospitality
27.2%
1,395
10.8%
Industry
Sources: Unemployment data derived from BLS, Employment Situation, December 2011. Table A-14:
Unemployed Persons by Industry, Published January 6, 2012. Percentage with employer-sponsored coverage
calculated by CRS from the 2011 Annual Social and Economic Supplement to the Current Population Survey
(CPS, representing data from 2010).
(...continued)
are seeking to enter or re-enter the labor force. These individuals are discussed in “Health Insurance Coverage for
Those Entering the Labor Force.”
26
For example, workers who had coverage prior to being unemployed could be eligible for COBRA coverage while
unemployed. See the “COBRA” section for more information. The Health Insurance Portability and Accountability Act
of 1996 (HIPAA, P.L. 104-191) guarantees that some individuals losing employer-sponsored insurance have certain
rights to purchase coverage in the individual market. For more information, see (archived) CRS Report RL31634, The
Health Insurance Portability and Accountability Act (HIPAA) of 1996: Overview and Guidance on Frequently Asked
Questions, by (name redacted) et al.
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Unemployment and the Availability of Health Insurance: Issues for Congress
Health Insurance Coverage for Those Entering the Labor Force
Those considered unemployed include individuals seeking to enter or re-enter the workforce and
actively looking for a job. Over one-third of the unemployed (35.4%) are just entering the labor
force either for the first time (9.7%) or re-entering after being out for some time (25.7%).27 This
latter group could include family caregivers looking to return to work, retirees looking to return to
work to supplement their income in the “down” economy, or those looking to return to work after
an extended illness.28
Those seeking to enter or re-enter the labor force did not necessarily lose employer-sponsored
coverage in their own names because they may not have had access to such coverage. Some may
have coverage through their spouse or parents, some may have retiree health benefits from a prior
employer, or some may be purchasing COBRA; others may be uninsured. For those who do not
have coverage, entering or re-entering the workforce may not provide immediate access to
employer-sponsored insurance. In 2011, 72% of newly insured employees were subject to a
waiting period before becoming covered, and the average waiting period was 2.2 months.29
Other At-Risk Groups
Complicating the analysis of unemployment and insurance coverage are certain other at-risk
groups who are not technically unemployed but who do not have coverage due to a change in
work status. These other at-risk groups include involuntary part-time workers and discouraged
workers who have left the workforce altogether.30 If these individuals were counted in the
December 2011 unemployment rate, it would increase from 8.5% to 15.2%.31 Legislative
proposals to help the unemployed with health insurance typically focus solely on individuals who
do not have a job and are actively searching for work; however, individuals in other at-risk groups
may also be without health insurance.
Involuntary Part-Time Workers
The number of involuntary part-time workers has decreased over the past year, from 8.9 million
to 8.1 million. These are individuals who wanted to work full-time but instead had to work parttime.32 Part-time workers are 1.5 times more likely to be uninsured (27.6%) compared to full-time
workers (17.6%),33 as employers are more likely to provide health benefits to full-time workers
27
BLS, Employment Situation, December 2011, Summary Table A-11: Unemployed Persons by Reason for
Unemployment, January 6, 2012.
28
CRS analysis of the 2011 Annual Social and Economic Supplement to the CPS (representing data from 2010).
29
Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits: 2011 Annual
Survey, September 27, 2011, http://ehbs.kff.org/.
30
Only individuals who are actively seeking work and are available for work are included in the statistics counting the
unemployed. Individuals who have stopped looking for work (discouraged workers) are not typically included in the
statistics counting the unemployed.
31
BLS, Employment Situation, December 2011, Summary Table A-15: Alternative Measure of Labor Underutilization,
January 6, 2012.
32
BLS, Employment Situation, December 2011, Summary Table A: Household Data Seasonally Adjusted, January 6,
2012.
33
Paul Fronstin, Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2011
(continued...)
Congressional Research Service
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Unemployment and the Availability of Health Insurance: Issues for Congress
than to part-time workers. In 2011, about 60.0% of all employers offered health benefits, but only
16.0% of these employers offered health benefits to part-time workers.34
Discouraged Workers
Another group at risk for not having health insurance coverage is discouraged workers—
individuals not currently looking for work because they believe jobs are not available for them.
As of December 2011, there were approximately 945,000 discouraged workers. This number has
more than doubled since the recession began in December 2007.35
Current Programs That Assist Some Unemployed
with Health Insurance
Current federal law includes several programs and tax treatments that might help some
unemployed with respect to health insurance. Programs and tax treatments for which coverage is
directly or otherwise closely related to being unemployed include the mechanisms listed below. In
subsequent sections, each of these programs and tax treatments is briefly summarized and
assessed. The assessment considers the advantages and disadvantages of each mechanism from
the perspective of unemployed individuals.
•
COBRA
•
Health Coverage Tax Credit
•
Medicaid
•
Itemized Deduction for Medical Expenses
•
Health Savings Accounts
COBRA
Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA, P.L. 99-272)
generally requires employers with 20 or more workers to provide employees and their families
the right to continue participation in the company’s group health plan in case of certain events,
one of which is involuntary dismissal. Depending on the triggering event, the continuation period
generally lasts up to 18 or 36 months.36
(...continued)
Current Population Survey, Employee Benefit Research Institute, Issue Brief No. 362, September 2011,
http://www.ebri.org/pdf/briefspdf/EBRI_IB_09-2011_No362_Uninsured1.pdf.
34
Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits: 2011 Annual
Survey, September 27, 2011, http://ehbs.kff.org/.
35
BLS, Employment Situation, December 2011, Summary Table A: Household Data Seasonally Adjusted, January 6,
2012; BLS, Employment Situation, December 2008, January 4, 2008.
36
CRS Report R40142, Health Insurance Continuation Coverage Under COBRA, by (name redacted). Forty states have
continuation laws of their own which extend COBRA-like protections to firms with fewer than 20 employees or
lengthen the continuation period for some individuals. Kaiser Family Foundation, Expanded COBRA Continuation
(continued...)
Congressional Research Service
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Unemployment and the Availability of Health Insurance: Issues for Congress
•
One attraction of COBRA for unemployed individuals is that they can continue in
the health plan they had while working; this is especially important when the
plan is linked to particular doctors and other providers. Additionally, employer
plans have group rates, which often are lower than individual market insurance
premiums for similar benefits when individuals are older or have health
conditions.
•
One limitation of COBRA for the unemployed has been that covered individuals
usually have to pay 102% of the health plan’s full premium (i.e., both the
employee’s and the employer’s share, plus a 2% administrative fee). Without
subsidies, typical premiums can consume a large part of an unemployment
benefit, or even exceed it in the case of family coverage.37
•
A second limitation of COBRA for the unemployed is that if a firm files for
bankruptcy under Chapter 7 of Title 11 of the U.S. Code, the employer ceases to
exist. Because COBRA is provided through the employer, if there is no employer,
there is no COBRA obligation.38
Health Coverage Tax Credit
The Health Coverage Tax Credit (HCTC) is an individual income tax credit that is both
refundable (allowing taxpayers to receive the full amount regardless of their tax liability) and
advanceable to health plans (allowing taxpayers to benefit from the credit while they have
coverage, not just after they file their returns the next year). The 72.5% credit39 can be applied to
premiums for 11 types of health insurance, 4 of which (including COBRA) are available
nationwide, but 7 of which first require state approval. Eligible taxpayers must be receiving Trade
Adjustment Assistance (TAA) benefits (or would be except that they have not exhausted their
unemployment benefits), Reemployment Trade Adjustment Assistance benefits, or pension
benefits being paid because the Pension Benefit Guaranty Corporation has taken over their
pension plan.40 Individuals are not eligible if they are enrolled in employer-sponsored insurance,
Medicare Part B, Medicaid, or CHIP (among others), or if they are entitled to Medicare Part A
(among others).41
(...continued)
Coverage for Small Firm Employees, 2010, http://statehealthfacts.org/comparetable.jsp?ind=357&cat=7&sub=
88http://www.statehealthfacts.org/comparetable.jsp?cat=7&ind=357&typ=5.
37
Squeezed! Caught between Unemployment Benefits and Health Care Costs. Families USA January 2009.
Bankruptcies under Chapter 7 of Title 11 of the U.S. Code are distinct from Chapter 11 bankruptcies. A Chapter 7
bankruptcy is a business liquidation and the employer goes out of existence; a Chapter 11 bankruptcy is a
reorganization and the employer remains in business and must therefore honor its COBRA obligations. See CRS
Report R40142, Health Insurance Continuation Coverage Under COBRA, by (name redacted).
39
When the HCTC was initially authorized in 2002 under the Trade Act of 2002 (P.L. 107-210), the subsidy rate was
65%. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) temporarily increased the subsidy
rate to 80%, with a sunset date of February 13, 2011. Under the Trade Adjustment Assistance Extension Act of 2011
(P.L. 112-40), the subsidy rate of 72.5% became retroactively effective on that date.
40
Prior to a change in legislation in 2011, Reemployment Trade Adjustment Assistance (RTAA) was known as
Alternative Trade Adjustment Assistance (ATAA). To receive TAA or RTAA benefits, individuals must meet certain
eligibility requirements. For more information see CRS Report R42012, Trade Adjustment Assistance (TAA) for
Workers, by (name redacted).
41
The HCTC eligibility rules are complex. For more information, see CRS Report RL32620, Health Coverage Tax
(continued...)
38
Congressional Research Service
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Unemployment and the Availability of Health Insurance: Issues for Congress
•
One attraction of the HCTC for the unemployed is that the 72.5% premium credit
applies regardless of annual income, which can help individuals who have
income earned earlier in the year before they become unemployed or who have a
spouse who remains employed.
•
Limitations of the HCTC for the unemployed include restricted eligibility
categories, short eligibility periods for some TAA beneficiaries (eligibility can
range from less than a year to over two years, depending on state residency and
other circumstances), and the inability of cash-strapped taxpayers to pay the
remaining part of the premium.42
Medicaid
Medicaid is a federal-state entitlement program targeted toward low-income individuals. It
finances health and long-term care services primarily for the elderly, individuals with disabilities,
members of families with dependent children, and certain other pregnant women and children.
Participants must meet low-income and sometimes limited-resource or asset tests that are
established by states within federal guidelines. States must cover certain categorical groups and
provide various defined services, but they have options to cover other groups and add other
services.43
•
One attraction of Medicaid for the unemployed is that the program can pay for a
wide range of medically necessary treatments, usually with small deductibles or
copayments relative to employer-sponsored coverage.
•
A limitation of Medicaid for the unemployed is that they might not meet income
and asset tests the states impose, and some (such as childless, non-disabled
adults) might not be categorically eligible. In addition, the doctors and other
providers they had prior to becoming unemployed might not accept Medicaid.
(See discussion about future expansions to Medicaid to non-traditional groups in
section on “The Affordable Care Act and the Unemployed.”)
Itemized Deduction for Medical Expenses
Taxpayers who itemize their deductions may deduct certain unreimbursed medical expenses that
exceed 7.5% of their adjusted gross income. These medical expenses include insurance
premiums, insurance deductibles and copayments, and direct payments to providers, among other
things. Most state income tax systems also allow a deduction for medical expenses, providing
additional tax savings.
•
One attraction of the itemized deduction for the unemployed is that it has no
employment-related eligibility tests; some individuals who have lost full-time
(...continued)
Credit, by (name redacted).
42
For more information about the limitations of the HCTC, see Stan Dorn, Health Coverage Tax Credits: A Small
Program Offering Large Policy Lessons,The Urban Institute (February 2008).
43
For more information, see CRS Report RL33202, Medicaid: A Primer, by (name redacted), and (archived) CRS Report
RL31698, Transitional Medical Assistance (TMA) Under Medicaid, by (name redacted).
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Unemployment and the Availability of Health Insurance: Issues for Congress
jobs but are not defined as unemployed (such as those who can only find
intermittent part-time work) could still use it.
•
A limitation of the itemized deduction is that one must itemize deductions to use
it; most lower-income taxpayers find that their standard deduction is larger. The
7.5% adjusted gross income floor further limits its use. In addition, deductions
result in little tax savings for lower-income taxpayers because their marginal tax
rates are relatively low (typically 10.0% or 15.0%). If taxpayers have no taxable
income prior to considering their medical expenses, the deduction would not help
them.
•
A second limitation of the itemized deduction is that it is not advanceable.
Individuals who plan to deduct their medical expenses must still pay for the
medical expenses at the time they are used. For example, a medical expense paid
in March 2010 could not be itemized until taxes are filed in 2011. This could be a
significant financial burden for individuals, particularly for those who are
unemployed.
Health Savings Accounts
Health Savings Accounts (HSAs) are tax-advantaged accounts that individuals can use to pay
unreimbursed qualified medical expenses such as deductibles, copayments, and services not
covered by insurance. Contributions, which are either excluded from taxes (if made by
employers) or deductible (if made by individuals) can be made only when individuals have
qualifying high-deductible health insurance; for most, the annual contributions in 2012 are
limited to $3,100 for self-only coverage and $6,250 for family coverage. Amounts not used one
year can be rolled over to the next. Withdrawals used to pay health insurance premiums usually
are taxable, but not when one is receiving unemployment benefits or within a COBRA
continuation period.44
•
One attraction of HSAs is that they can serve as a rainy-day health care fund. If
individuals contribute to them regularly over a number of years, they could
accumulate a balance that can be used when they are unemployed. HSAs are
portable and not tied to continued work for a particular employer.
•
A limitation of HSAs for the unemployed is that one must have high-deductible
insurance (deductibles of at least $1,200 for single coverage or $2,400 for family
coverage in 2012) in order to be eligible to make contributions to the HSA; many
individuals are reluctant to accept the risk of such a high deductible, even though
high-deductible insurance premiums are somewhat lower. Individuals with highdeductible insurance sometimes do not contribute to an HSA or, if they do, they
use the money soon afterwards and cannot build up substantial balances.45
44
For more information about HSAs, see CRS Report RL33257, Health Savings Accounts: Overview of Rules for 2012,
by (name redacted).
45
U.S. Government Accountability Office, Health Savings Accounts: Participation Increased and Was More Common
Among Individuals with Higher Incomes, GAO-08-474R, April 1, 2008, http://www.gao.gov/assets/100/95416.pdf.
Congressional Research Service
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Unemployment and the Availability of Health Insurance: Issues for Congress
The Affordable Care Act and the Unemployed
The ACA46 provides a number of immediate reforms to the health insurance market. Several
provisions of the ACA are intended to increase consumer access to health insurance.47 For
example, the ACA creates the Pre-Existing Condition Insurance Plan (PCIP). The PCIP is a
temporary, high-risk pool program that provides coverage to individuals who have been
uninsured for at least six months, have a preexisting condition or have been denied coverage
because of a health condition, and are U.S. citizens or legal aliens.48 The PCIP provides access to
health insurance to these individuals, but it does not provide financial assistance to the
individuals. The PCIP operates in every state and is to remain in effect until 2014, when
individuals in the program will have access to coverage through the health insurance exchanges
created by the ACA. As of November 2011, there were 44,852 individuals throughout the country
enrolled in the PCIP.49
An ACA provision that is helping certain unemployed individuals under age 26 obtain or retain
health insurance is the expansion of dependent coverage. Effective for plan years beginning after
September 23, 2010, the ACA generally requires that if a plan provides for dependent coverage of
children, the plan must continue to make such coverage available for an adult child until age 26.50
This provision is effective only if the parent has health insurance and that insurance covers
dependents. Recently, the Department of Health and Human Services reported that since the
policy took effect in September 2010, the percentage of adults aged 19-25 who are covered by
private insurance has increased significantly, from 64% in September 2010 to 73% in June
2011.51
Beyond the immediate reforms to the health insurance market, beginning in 2014 the ACA will
also provide premium tax credits and cost-sharing subsidies for certain eligible individuals who
obtain coverage through a health insurance exchange, which could include some unemployed
individuals.52 The premium tax credit will be an advanceable, refundable tax credit, meaning
taxpayers can benefit from the credit before the end of the tax year and may claim the full credit
amount even if they have little or no federal income tax liability. Those who qualify for premium
credits and are enrolled in certain plans in the health insurance exchange could also be eligible for
assistance in paying any required cost-sharing for their health services.
46
P.L. 111-148 as amended.
See CRS Report R42069, Private Health Insurance Market Reforms in the Patient Protection and Affordable Care
Act (ACA), by (name redacted) and (name redacted).
48
For more information about the PCIP program, see http://cciio.cms.gov/programs/pcip/index.html.
49
Department of Health and Human Services, “State by State Enrollment in the Pre-Existing Condition Insurance Plan,
as of November 30, 2011,” press release, January 13, 2012, http://www.healthcare.gov/news/factsheets/2012/01/
pcip01132012a.html.
50
CRS Report R41220, Preexisting Condition Exclusion Provisions for Children and Dependent Coverage under the
Patient Protection and Affordable Care Act (ACA), by (name redacted).
51
Assistant Secretary for Planning and Evaluation, Department of Health and Human Services, 2.5 Million Young
Adults Gain Health Insurance Due to the Affordable Care Act, December 2011, http://aspe.hhs.gov/health/reports/
2011/YoungAdultsACA/ib.shtml.
52
See CRS Report R41137, Health Insurance Premium Credits in the Patient Protection and Affordable Care Act
(ACA), by (name redacted) and (name redacted).
47
Congressional Research Service
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Unemployment and the Availability of Health Insurance: Issues for Congress
In addition, in 2014, or sooner at state option, the ACA will expand Medicaid access to certain
individuals who are under age 65 with modified adjusted gross income (MAGI) 53 up to 133% of
the federal poverty level ($30,657 for a family of four in 2012).54 The ACA not only expands
eligibility to a group that is not currently eligible for Medicaid (low-income childless adults), but
also raises Medicaid’s mandatory income eligibility level for certain existing groups up to 133%
of FPL.55
Since most of these provisions will not be implemented until 2014, this results in an interim
period when unemployed individuals lack assistance in obtaining health insurance coverage.
While some unemployed individuals may access coverage before then (due to possible early state
expansions, for example), most unemployed individuals will not obtain financial assistance for
coverage before 2014.
Issues for Congress
It is difficult to predict how long Americans will continue to feel the effects of the recent
economic recession. Even if economic growth recovers, growth in employment may lag; the CBO
expects the national unemployment rate to remain above 8.0% through 2014.56 Unemployment
could remain high in some areas and for some groups even after the national average goes
down.57 Whatever the pattern, the unemployed might have difficulty obtaining and/or affording
health insurance for some time.
As shown in the preceding discussions, the unemployed are not a homogenous group. Some
individuals lose employer-sponsored health insurance when they lose their jobs, but other
unemployed individuals may not have coverage to begin with. In addition, there are involuntary
part-time workers and discouraged workers who do not have coverage. These issues raise related
policy questions, including, Should the federal government provide assistance to all of these
groups? If so, what are the advantages and disadvantages of providing assistance? For those
considering assistance, what are the advantages and disadvantages to giving higher priority to
some groups? Several issues are involved:
•
Given that many people will receive assistance in 2014, is it preferable to
maintain the status quo until then?
•
Among those who support more assistance and/or immediate assistance:
53
For more information about MAGI, see CRS Report R41997, Definition of Income in ACA for Certain Medicaid
Provisions and Premium Credits, coordinated by (name redacted).
54
The ACA specifies that an income disregard in the amount of 5% FPL will be deducted from an individual’s income
when determining Medicaid eligibility based on MAGI, thus the effective upper-income eligibility threshold for such
individuals in this new eligibility group will be 138% FPL.
55
To qualify for Medicaid, an individual must meet both categorical (i.e., must be a member of a covered group, such
as children, pregnant women, families with dependent children, the elderly, or the disabled) and financial eligibility
requirements. There are approximately 50 different eligibility “pathways” into Medicaid, including those that existed
before the ACA was enacted. For more information, see CRS Report R41210, Medicaid and the State Children’s
Health Insurance Program (CHIP) Provisions in ACA: Summary and Timeline, by (name redacted) et al.
56
CBO, The Budget and Economic Outlook: Fiscal Years 2012 to 2022, January 2012, http://www.cbo.gov/
publication/42905.
57
For more information see Metropolitan Area Employment and Unemployment: December 2009, U.S. Bureau of
Labor Statistics News, January 22, 2010, at http://www.bls.gov/news.release/pdf/metro.pdf.
Congressional Research Service
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Unemployment and the Availability of Health Insurance: Issues for Congress
•
In general, there appears to be a trade-off between concerns about cost and
concerns about equity. Providing assistance to all the groups mentioned
above would cost more than helping just those who lost employer-sponsored
coverage, but on grounds of equity it may be difficult to justify not helping
all. However, if the immediate goal is not to allow the number of uninsured
individuals to increase, there is something to be said for giving higher
priority to those who recently had coverage.
•
If assistance is given to those who did not have employer-sponsored
coverage, what form of coverage should they have? Should they be enrolled
in public programs such as Medicaid or Medicare, or should they be
permitted private insurance options? If the latter were allowed, what benefit
and consumer protection standards might apply?
While comprehensive health care reform has been enacted, it will not provide immediate health
insurance coverage to all currently unemployed individuals. For those considering more
immediate action, there are a number of legislative proposals that could be considered in the 112th
Congress. The proposed programs would likely be temporary, however, and would provide some
coverage until the ACA is fully implemented and the health care exchanges are operational (in
2014).
Extending COBRA
Legislative proposals to extend COBRA include extending the eligibility period for the COBRA
premium subsidy included in the American Recovery and Reinvestment Act of 2009 (ARRA, P.L.
111-5 and subsequently extended) to those unemployed after May 31, 2010, and/or extending the
eligibility period for receiving COBRA at unsubsidized rates beyond 18 months.
Extend the Eligibility Period for COBRA Premium Subsidy
A provision of ARRA, as extended through subsequent amendments, provided a 65% COBRA
subsidy in the form of an employer tax credit for eligible workers who became unemployed
before May 31, 2010. The subsidy was limited to 15 months, and individuals had to pay the
remaining balance. This provision has since expired. The COBRA premium subsidy was not
available for those who lost their jobs after May 31, 2010. One advantage of further expanding
eligibility for COBRA premium subsidies is that the legislative and regulatory frameworks
(including administrative procedures and legal interpretations) are already in place. A
disadvantage for the unemployed is that COBRA subsidies are limited to only a portion of those
out of work, and they do not apply to those who may be just entering or re-entering the workforce
after an extended absence. In addition, some employers find changes to COBRA administratively
burdensome,58 and the extensions would add expenditures to an already strained federal budget.59
58
Rebecca Vesely, “Feeling COBRA’s Bite,” Modern Healthcare, May 18, 2009.
The Joint Committee on Taxation estimated the COBRA subsidy to cost $24.5 billion over three years and the HCTC
expansion $457 million. 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,” JCX-19-09,
February 12, 2009, http://www.jct.gov/publications.html?func=startdown&id=1172.
59
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Unemployment and the Availability of Health Insurance: Issues for Congress
Extend Eligibility Period for Receiving COBRA Beyond 18 Months
In addition to extending the COBRA premium subsidy, another possible option is to extend the
COBRA eligibility period, which now is generally limited to 18 months. An extension could help
individuals who need more time in a prolonged recession (or in its after effects) to find jobs that
provide health insurance. As noted earlier, a limitation of unsubsidized COBRA for the
unemployed has been that covered individuals usually have to pay 102% of the health plan’s full
premium. Because most employers subsidize health insurance premiums for their workers, the
102% COBRA premium may not be affordable for the unemployed, especially when compared
with the average level of unemployment compensation. Employers might argue that extended
coverage would be most attractive to individuals who have (or whose family members have)
serious health problems. If this were the case, covering these individuals in the plan could raise
costs for others in the plan. While extending COBRA would not increase federal expenditures, it
would provide access to health insurance, but not necessarily financial relief from paying for the
coverage, to individuals.
Medicare Expansion
As noted in the preceding discussion, individuals aged 55 and older are a growing segment of the
unemployed population. Unemployed individuals in this age group often have more difficulty
finding another job (or at least another job comparable to the one they lost), have fewer working
years remaining to recover financially, and are at an increased risk of health problems. Some have
proposed allowing older unemployed individuals to buy into Medicare early, that is, to join the
Medicare program by paying premiums. Individuals are generally not eligible for Medicare until
age 65.60
Many different design options need to be considered in this approach, including who would be
eligible and the possibility of subsidies. One approach is not to provide subsidies, but instead to
fully fund the program by charging premiums for individuals aged 62 to 64. Individuals who do
not have employer-sponsored health insurance or Medicaid could voluntarily enroll in Medicare.
Premiums would equal the average expected cost of the program plus an administrative fee of
5%. CBO estimated that the annual premium for single coverage would be $7,600 in 2011. CBO
also estimated that this would indirectly increase mandatory spending for Social Security, as it
may encourage some individuals to retire earlier than they otherwise would have.61
A Medicare buy-in is similar in some ways to expanding the eligibility period for COBRA
beyond the 18-month window. Both would require enrollees to pay the full cost of the coverage.
There are advantages, however, to the COBRA option versus the Medicare buy-in. First, the
COBRA option would be available to all the unemployed who have access to employersponsored insurance through former employment, regardless of age. Second, for the older
unemployed, the premiums would most likely be lower under the COBRA option because the
pool of applicants would include a more diverse group in terms of age and the administrative cost
(of 2%) is lower. The advantage of the Medicare buy-in proposal compared to the COBRA option
60
Certain individuals can qualify for Medicare under age 65 based on disability, although in most circumstances there
is a 24-month waiting period for Medicare once the individual is deemed disabled.
61
For a more detailed description of this proposal see Congressional Budget Office (CBO), Budget Options Volume 1:
Health Care, 2008.
Congressional Research Service
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Unemployment and the Availability of Health Insurance: Issues for Congress
is that the Medicare buy-in would cover older workers re-entering the labor force, whereas the
COBRA option would apply only to those individuals who had left a job.
Author Contact Information
(name redacted)
Analyst in Health Care Financing
/redacted/@crs.loc.gov, 7-....
Acknowledgments
(name redacted), a former CRS Specialist in Health Ca re Financing, wrote the original version of this
report.
Key Policy Staff
Area of Expertise
Name
Phone
Health Insurance Data
Annie Mach
7-....
/redacted/@crs.loc.gov
Health Care Tax Issues
(name redacted)
7-....
/redacted/@crs.loc.gov
Medicaid
Evelyn Baumrucker
7-....
/redacted/@crs.loc.gov
COBRA
(name redacted)
Unemployment Compensation
Julie Whittaker
Health Coverage Tax Credit
(name redacted)
Older Workers and Unemployment
(name redacted)
Trade Adjustment Assistance
(name redacted)
Congressional Research Service
7-....
7-....
7-....
/redacted/@crs.loc.gov
/redacted/@crs.loc.gov
/redacted/@crs.loc.gov
7-....
7-....
/redacted/@crs.loc.gov
/redacted/@crs.loc.gov
18
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