Healthcare too costly for unemployed, study says

Newly unemployed Americans would have to spend an average of about 30% of their jobless benefits to pay for health insurance through their former employer, according to a new report.

And if they want coverage for their families, the report by Families USA says, it will take more than 80% of their unemployment check.

U.S. unemployment hit a 16-year high last month as an additional 524,000 jobs were lost. For all of 2008, the government says the economy lost 2.6 million jobs.

Workers who lose their jobs are usually eligible to maintain their health insurance coverage through their old employer if they pay the premiums plus a 2% administrative fee. The benefit is referred to as COBRA insurance, because of the law that established it.

As part of his economic stimulus package, President-elect Barack Obama is proposing to spend about $80 billion to extend unemployment benefits and to subsidize healthcare for people who have lost their jobs.

Families USA, an advocacy group, says its report comparing average COBRA costs and unemployment benefits shows the need for the subsidy proposed by Obama.

At present, paying for COBRA borders on unrealistic for most people who lose their jobs. The cost cuts too deeply into their government-paid jobless benefits.

“This very important right is not meaningful in reality,” said Ron Pollack, the group’s executive director.

Continuing health coverage through former employers is particularly difficult for families. Indeed, in nine states, the average premium for family coverage equals or exceeds their unemployment benefits, the Families USA report said. The states are Alabama, Alaska, Arizona, Delaware, Florida, Louisiana, Mississippi, South Carolina and West Virginia.

In all those states except South Carolina workers would have to spend more than 40% of their unemployment insurance on COBRA premiums for individual coverage.