COBRA Enrollment Doubles After Subsidy Program Begins

The percentage of involuntarily terminated employees opting for COBRA continuing health insurance coverage has doubled since a federal subsidy program began, a study shows.

An economic stimulus measure Congress passed in February includes the federal government paying 65% of the COBRA premium for up to nine months for workers terminated involuntarily through year-end.

From March 1—when the subsidy generally became available—through June 30, monthly enrollment rates for laid-off employees averaged 38%, according to the Hewitt Associates Inc. analysis of COBRA enrollments among 200 large employers.

By contrast, from Sept. 1, 2008, through February 2009, on average 19% of involuntarily terminated employees were enrolled in COBRA.

“We expected the numbers to jump. The coverage becomes much more affordable” because of the subsidy, said Karen Frost, a health and welfare outsourcing leader for Hewitt in Lincolnshire, Ill.

The rise in COBRA enrollment also means higher costs for employers, though how much is not yet known.

COBRA premiums often are about $400 a month for individual coverage and $1,200 a month for family coverage. Those opting for COBRA typically make extensive use of medical services, often resulting in employers paying about $1.50 in claims for every $1 in COBRA premiums they collect.

With the government picking up 65% of the COBRA premium tab, the COBRA risk pool is likely improving, though premiums collected by employers still are not likely to equal claims, Ms. Frost said.

Individuals who can enroll in another group plan are ineligible for the COBRA subsidy.

The Hewitt survey is available at www.hewitt.com.