In his January 29 State of the Union address, President George W. Bush called on Congress to give "direct assistance" to displaced workers for health care coverage. Hundreds of thousands of workers have lost their jobs and the security of their private health care coverage during the past several months.
The President recognizes the urgency in providing unemployed, displaced workers with immediate health care assistance. But there are some leading proposals on Capitol Hill that do not adequately address this issue, and some that do not address the issue at all. For example, the very latest proposal by Senator Tom Daschle (D-SD) recommends a "scaled-back" version of the House-passed economic stimulus package that effectively neglects the growing number of working families who have lost their health insurance. Instead of providing immediate and direct assistance to these families, the Daschle proposal would offer states a modest increase for Medicaid spending, placing the burden on them to enroll unemployed workers and their families in the financially strapped welfare program.
Unemployment is still rising. The Department of Labor reported that in December, the unemployment rate rose to 5.8 percent, a loss of another 124,000 jobs. Recent analysis has shown that for every percentage point increase in the unemployment rate, a projected 860,000 individuals will loose their health insurance. Families USA has estimated that over 529,000 laid-off workers lost health care coverage between September and the end of November. Many of these families have been without health care coverage for over four months, and some even longer. As these figures show, the number of uninsured is growing, not falling.
Congress can help unemployed workers and their families by building on the bipartisan compromise package passed by the House of Representative in December 2001. That bill would give displaced workers the immediate and direct health care assistance that they need. Congress must act now by passing legislation that will help displaced workers secure health care coverage for themselves and their families during this temporary period of unemployment.
The Daschle Plan: An Inadequate Response to an Emergency
Senator Daschle's proposal offers no hope for unemployed workers who have lost their private health care coverage. The "scaled-back" economic stimulus and unemployment assistance package excludes the most vital assistance needed by displaced workers: health care assistance. The omission of direct health care assistance only prolongs the painful time these displaced workers and their families must endure without coverage. The provisions included in the Daschle bill aimed at unemployment assistance or health care are limited to the following:
Extends Unemployment Benefits. The legislation provides for 13 weeks of extended unemployment benefits to workers who have exhausted their regular benefits. While unemployment benefits may provide financial relief to families coping with tight budgets, it certainly does not help unemployed workers afford health care coverage. As the Kaiser Commission on Medicaid and the Uninsured points out, "a family receiving the average monthly unemployment benefit of $925 per month with no other income would need to spend nearly two-thirds of the family's income to maintain family coverage at $600 per month under the average COBRA coverage." Unemployment benefits alone will not help displaced workers maintain health care coverage. With specific reference to the health care needs of these individuals and their families, this proposal falls far short. For those without access to COBRA coverage, it is even less sufficient.
Increases State Medicaid Funds. The proposal also calls for a 1.5 percent, across-the-board federal match increase for state Medicaid spending and a 3 percent increase for states with high unemployment rates. While states are facing budgetary shortfalls due mainly to exploding Medicaid costs, this additional spending will do little to secure health care coverage for the growing thousands of unemployed workers and families without it. These funds are directed not at those unemployed, uninsured families who are struggling without coverage and who are in desperate need of such assistance, but rather to a profoundly flawed Medicaid program that is unable to keep up with the costs and care of its current enrollees.
Furthermore, the additional matching Medicaid funds for high-unemployment states would encourage those states to enroll more and more of their unemployed workers in Medicaid, as has been done in New York State where an unprecedented 75,000 people were enrolled after September 11. Unemployed workers should not be forced to enroll in a welfare program in order to secure health coverage for themselves and their families. Instead, they should be given a "helping hand" that will allow them to obtain superior private health care coverage. It is hard to imagine Members of Congress and other hard-working Americans voluntarily giving up private insurance coverage to enroll in Medicaid.
The President's Plan: A Comprehensive Solution
There is no reason why Congress should hesitate to give displaced workers and their families direct assistance for health care coverage. The Economic Security and Worker Assistance Act of 2001, passed by the House of Representatives on December 20, 2001, represents a far better and more generous approach than that offered by Senator Daschle, or even an earlier proposal put forward by Senator Max Baucus (D-MT). The House-passed bill recognizes the immediate needs of unemployed, displaced workers and their families and offers them meaningful health care assistance. This proposal provides laid-off workers a refundable, "up-front" tax credit that would pay 60 percent of the premium of a private plan of their choice. Most important, it meets several key requirements. Specifically, the bill is:
Targeted. The President's proposal would give all displaced workers an "up-front" credit for health care coverage. Any worker involuntarily laid-off and eligible for unemployment benefits would qualify, regardless of whether he or she was previously enrolled in employer-sponsored coverage. This is in sharp contrast to limiting assistance only to unemployed workers who had employer-sponsored coverage and who qualified for COBRA, as was proposed by Senator Baucus last fall. The Baucus proposal, for example, would have disqualified low-wage and Hispanic workers, who are less likely to qualify for COBRA, but would have qualified high-paid executives who more likely to maintain coverage without assistance. This kind of restriction is unfair.
Effective. The President's proposal would give displaced workers the coverage of their choice. It allows unemployed workers to decide the most suitable and affordable coverage option for themselves and their families. Whether they choose COBRA coverage or a basic catastrophic plan, individuals and families know their financial and medical situation better than any government bureaucrat or politician. Unlike the Baucus bill, which would have created an "all-or-nothing" predicament by requiring that assistance be used only for costly COBRA coverage, the President's proposal would offer displaced workers affordable coverage options.
Immediate. The President's proposal also would create a quick and easy mechanism to deliver the credit. It would utilize existing Unemployment Insurance offices to assist displaced workers in claiming and applying their credits. These are the same offices that already provide laid-off workers with their unemployment compensation benefits and even for some training. This is a logical "one-stop-shop" for providing unemployed workers the variety of assistance they need. The United States Department of the Treasury, which administers tax law, has indicated that it could efficiently implement such a health care tax credit.
The House-passed economic stimulus package (H.R. 3529) also includes some basic consumer protection provisions. For workers who maintained employer-sponsored coverage for at least one year prior to their dismissal, the same access requirements governing COBRA coverage would apply to those plans purchased in the individual market. The intent of these provisions is to ensure that individuals are not penalized for purchasing more affordable coverage on the individual market.
In addition, the House bill provides $4 billion in emergency grant funds for states. The language requires that no less than 30 percent of the funds be used to assist unemployed workers with health care coverage. This additional money will allow states to build on the foundation of the federal tax credit. For instance, a state could offer an additional 15 percent in premium support, leaving the worker's premium obligation at a mere 25 percent.
Some Potential Improvements
The House-passed H.R. 3529 would address the immediate, growing needs of displaced workers who desperately want to keep or obtain their own health insurance coverage. But there is no reason why the legislation, as sound as it is, could not be modified or improved to accomplish that end. There are several possibilities.
1. Make the subsidy for the unemployed more generous. This could be done, for example, by raising the percentage of the tax credit from 60 percent to 75 percent of the premium.
2. Make coverage more affordable. This could be done by allowing organizations, associations, and other non-employer groups to offer health care coverage without tax or regulatory penalties. For example, churches, rotary clubs, and university alumni could sponsor their memberships' health care coverage. Also, high-risk pools could be established to ensure that hard-to-insure individuals have access to private health care coverage as well.
3. Allow workers to roll over funds in their tax-free flexible spending accounts (FSAs), available to them under Section 125 of the Internal Revenue Code, and let laid off workers use those funds to offset the costs of COBRA coverage, the costs of private health insurance options, or the payment of out-of pocket medical expenses.
The bipartisan compromise, H.R. 3529, endorsed by the President and passed by the House of Representatives, would give displaced workers and their families immediate and direct health care assistance that would enable them, instead of enrolling in a flawed welfare program, to keep or obtain private health care coverage. Senator Daschle's latest proposal does not help these families get the health care coverage that they need, want, or deserve.
Congress should do the right thing for Americans who find themselves without a job and without health care coverage. Further delay will only prolong the time these individuals and their families will have to live in fear of not having coverage. If left with no alternative, many of these persons either will be forced to enroll in the substandard Medicaid program or will simply remain uninsured. Congress has the opportunity to give all displaced workers a useful health care credit that will allow them to purchase private coverage of their choice and restore their own health care security during this difficult period in our nation's history.
Owcharenko is a Policy Analyst for health care at The
President George W. Bush, State of the Union Address, January 29, 2001.
U.S. Department of Labor, news release, January 24, 2002, available at http://www.dol.gov/opa/media/press/opa/OPA2002014.htm.
" New Unemployment Numbers Indicates over 529,000 Laid-Off Workers Lost Health Coverage from September Through November," press release, Families USA, December 7, 2001, available at http://www.familiesusa.org/media/press/2001/lostjobs.htm.
Diane Rowland, " Health Insurance for Unemployed Workers," testimony submitted to the Committee on Health, Education, Labor and Pensions, U.S. Senate, Kaiser Commission on Medicaid and the Uninsured, October 2001, p. 9, available at http://www.kkf.org. The committee's hearing subsequently was cancelled.
Vernon Smith and Eileen Ellis, "Medicaid Budgets Under Stress: Survey Findings for State Fiscal Year 2000, 2001, and 2002," prepared for the Kaiser Commission on Medicaid and the Uninsured, October 2001, p. 12.
Dale Russakoff, " Out of Tragedy, N.Y. Finds Way to Treat Medicaid Need," The Washington Post, November 26, 2001, p.A2.
An estimated 60 percent of low-income workers under 200 percent of poverty and 50 percent of Hispanics would be ineligible. Michelle M. Doty and Cathy Schoen, " Maintaining Health Insurance During a Recession: Likely COBRA Eligibility," Commonwealth Fund Issue Brief, December 2001, p. 3, available at http://www.cmwf.org.
Under current law, individuals may maintain their employer-sponsored coverage provided they pay 102 percent of the full premium. The Kaiser Commission estimates that the average employer-sponsored plan $221 per month for an individual and $588 per month for a family. " COBRA Coverage for Low-Income Unemployed Workers," Coverage Basics, Kaiser Commission on Medicaid and the Uninsured, October 2001, available at http://www:kff.org.
Elizabeth White, "Bush Administration Urges Tax Credit for Displaced Workers to Buy Coverage," Bureau of National Affairs, December 13, 2001, p. G5.
The legislation applies the "guarantee issue" and "pre-existing condition" protections governing COBRA coverage to those plans sold on the individual market to displaced workers who have maintained employer-sponsored coverage for at least one year.