INTRODUCTION

The current recession is having a devastating impact on working American families. By November 2008, more than 2.7 million people had joined the ranks of the unemployed since the recession began in 2007, and 10.3 million people were unemployed. Many of those people (and their families) lost their health coverage when they lost their jobs. Researchers estimate that, for every one percentage point increase in unemployment, the number of uninsured people increases by 1.1 percent. Some workers who had insurance through their former employers may be able to continue to purchase the same coverage—but they must pay the full cost out of their own pockets. This continuation coverage, called “COBRA” (from the Consolidated Omnibus Budget Reconciliation Act of 1985), could provide a vital health care lifeline for many families. Unfortunately, for most individuals and families, the cost of this coverage is prohibitively high, especially when compared to average unemployment benefits.

This report shows that, to maintain their employer-based health coverage under COBRA, most unemployed people would have to devote an unrealistically high proportion of their incomes to health insurance. For many, it would take their entire unemployment check and more to continue coverage for themselves and their families. However, if laid-off workers do not continue their employer-based coverage by electing COBRA and instead seek coverage in the individual health insurance market, those with health problems are likely to find that no insurer will sell them a policy that will cover their pre-existing conditions at any price. Thus, many American workers find themselves in a catch-22.

Note: On January 9, 2009, the Department of Labor announced that the unemployment rate had risen to 7.2 percent in December 2008, bringing the total number of unemployed to slightly over 11.1 million, an increase of more than 3.5 million since the recession began in December 2007.

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