State Unemployment Insurance Systems Being Modernized in Anticipation of Federal Recovery Program Funds

When Governor O'Malley (D-MD) announced his legislative agenda for the session, one centerpiece was an expansion of unemployment insurance to part-time workers currently excluded.  Other states, including  California, Hawaii, Oregon, Colorado, Minnesota, Iowa, Utah, and Texas are passing that and other reforms to modernize antiquated systems that leave many unemployed without help.  In fact, due to state rules, only 17 percent of low-wage unemployed workers and 37 percent of higher-wage unemployed workers are receiving benefits.

States are acting partly in anticipation of new federal help that, as we outlined in a December Dispatch, advocates have been pushing for and the House included in their original version of the federal recovery package.  That version included $7 billion for the Unemployment Insurance Moderization Act ( S. 1871/H.R. 3920, Title IV) which would provide incentive payments to states that have or will implement initiatives to help low-wage, women, and part-time workers get through these tough times.  Over the past decade, more than half the states have already adopted the reforms that qualify for incentive funding under the UIMA.

Models for Reform:  Legislative language on the provisions falls into several categories:

  • Washington has strong language on creating an alternative base period during which a worker's most recent income can count toward calculation of UI benefits.The state also passed extended unemployment benefits for workers who are still in training.
  • Georgia has already passed language that allow part-time workers to gain access to the UI benefits that they have paid into. New Mexico also provides benefits for part-time workers and proposed New Mexico HB 20 would provide a $15 additional allowance per week per dependents.
  • California allows for spouses who have to move to a different state to follow their spouse's change of job to apply for UI benefits. 

The National Employment Law Project has outlined models for unemployment insurance expansion here with a state by state guide as to what each state needs to do to achieve UIMA reforms to qualify for federal funding. 

Reforms Can Encourage Reemployment: Despite concerns that expanding eligibility for unemployed residents will bear too great a financial burden, lessons can be drawn from North Carolina, which extended unemployment insurance benefits three years ago to part-time workers and those with sporadic or only recent work history.  Employment Security Commission president Tom Whitaker found that the change resulted in fewer repeat claims and no significant increase in total benefits: "Instead, we've moved more people from the unemployment line to the re-employment line and decreased our workload." 

Health benefits for the unemployed  Another key reform included in the current House version of the recovery package is a temporary expansion of Medicaid to cover unemployed individuals up to 200% of the poverty line, while providing a 65% subsidy for coverage under former employer health plans under the COBRA program for those making more.  Unfortunately, the current Senate bill strips most of those provision out, leaving the unemployed vulnerable to medical catastrophe.

Amidst the federal stimulus debate around health care for unemployed workers, Families USA has released an important report detailing what states can do to protect unemployed workers' coverage.  The report provides state-by-state recommendations for immediate action by legislators - these include enacting "mini-COBRA" laws and allowing individuals who have lost employer coverage to purchase coverage in the indvidual market from their previous insurers without limitations for pre-existing conditions.

Need for Congress to Act:  With several states are facing insolvent UI benefit funds as unemployed residents flood the rolls and facing the loss of health care from their previous employers, it is even more important that Congress pass the stimulus package to ensure that state unemployment funds can stay solvent and states can reform.   Notably, unemployment benefits go a long way to stimulate the economy , providing $2.15 in economic growth for every dollar in benefits spent by workers and their families on housing, groceries and other basic necessities.


Progressive States, Unemployment Insurance Modernization Should be Part of Recovery Plan
Unemployment Insurance Moderization Act, S. 1871/H.R. 3920, Title IV
Families USA - Protecting Unemployed Workers' Health Coverage: What States Can Do
Peter S. Hart/NELP Poll of Unemployed Persons
Implementing the Model Provisions of the Unemployment Insurance Modernization Act in the States - National Employment Law Project (NELP)
This guide provides a summary of the key reforms that qualify for incentive funding under the UIMA and model state legislation to help policy makers in the states as they introduce bills in preparation for their legislative sessions.
GAO Report — Receipt of Benefits has declined, with disparities for low-wage and part-time workers
The Unemployment Insurance Modernization Act: Filling the Gaps in the Unemployment Safety NetWhile Stimulating the Economy - National Employment Law Project (NELP)
This handy fact sheet provides information on UIMA and key state-by-state data. 
Center for Budget & Policy Priorities, Addressing Longstanding Gaps in Unemployment Insurance Coverage
NELP, Close the Deal on Health Care for the Unemployed