How the Stimulus Helps Laid-Off Workers

Several provisions in the stimulus bill aid recently unemployed workers.

Help with health-insurance bills. When you lose or leave your job, you can generally continue coverage through your employer's health-insurance plan for up to 18 months through a federal program called COBRA. You can't be rejected or charged more because of your health.

But the costs of COBRA coverage are very high. While employers usually pay about three-fourths of the premiums for their current employees, that subsidy disappears for laid-off workers -- leaving them with an average annual bill of $12,680 for family coverage, according to the Kaiser Family Foundation.

The stimulus provides a 65% subsidy to help cover the cost of COBRA for up to nine months. To qualify, a worker must be involuntarily terminated between September 1, 2008, and December 31, 2009. The subsidy ends if you find a job and your new employer offers health-care coverage or you become eligible for Medicare.

Workers who have lost their jobs since September 1, 2008, but didn't elect COBRA will be given 60 days to elect COBRA and receive the subsidy after being notified by their former employer that they are again eligible. To qualify, your income for the year must be less than $125,000 for individuals and $250,000 for families.

Keep in mind, however, that not all laid-off workers qualify for COBRA. The federal law requires only companies with 20 or more employees to offer COBRA benefits (some states have similar programs, or "mini COBRAs," for smaller companies), and COBRA is available only if an employer continues to offer health benefits to employees. If the employer discontinues its health-insurance plan entirely or goes out of business, there is no COBRA.

If COBRA coverage is not available, you may be able to get an individual health-insurance policy or, if you have health problems, you may be able to get coverage if your state has a high-risk pool or some type of continuation policy. See Keeping Coverage After a Job Loss for more information about your health-insurance options after a layoff.

Bigger and longer unemployment benefits. The stimulus bill also increases weekly unemployment benefits by $25 through 2009. The amount of your unemployment benefits continues to vary based on your previous income and your state, but everyone will receive an extra $25 per week. This increase is automatic -- people who are receiving benefits won’t need to take any special steps to boost their benefits. But it may take a few weeks for the state unemployment offices to reprogram their software programs and add the extra money, says Rich Hobbie, executive director of the National Association of State Workforce Agencies.

Plus, people collecting unemployment benefits get a tax break. Unemployment benefits are usually subject to federal income tax. But people receiving unemployment benefits in 2009 will be able to exclude the first $2,400. Any benefits you receive beyond that in 2009 will be subject to federal income tax.

The bill also extends the emergency unemployment-compensation program, which provides up to 33 weeks of extended unemployment benefits to workers who exhaust their regular benefits. Contact your state unemployment-benefits office for more information about receiving extended benefits (see the unemployment benefits map for links.

For more information about collecting unemployment benefits, see What You Need to Know About Unemployment Benefits.