COBRA enrollment rates remain high even though laid-off workers aren't receiving any more federal help to pay for premiums.
June was the first month the federal COBRA subsidy program wasn't available to involuntarily terminated workers, but a study from Hewitt Associates shows one in five terminated employees was enrolled in COBRA coverage. This is almost twice as high as historical, pre-subsidy enrollment rates. The historical monthly average rate is 12 percent; Enrollment in June was 21 percent.
When looking only at the subset of workers who were involuntarily terminated and eligible for the COBRA subsidy, Hewitt's analysis showed the average monthly enrollment rate was 38 percent, with enrollments peaking in June 2009 at 46 percent. For May 2010–the last month that the subsidy was available–the COBRA enrollment rate for involuntarily terminated workers was 31 percent.
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"With the unemployment rate close to 10 percent, more Americans have to turn to COBRA as a way to access health insurance, especially for workers who are involuntarily terminated and either don't have a new job right away, or don't have a job with an employer-provided health plan," said Karen Frost, Hewitt's Health and Welfare Outsourcing leader. "However, enrollment rates will likely decline over time, as workers can't–or aren't willing to–afford the high premiums associated with COBRA coverage. Additionally, workers who enrolled in June anticipating the subsidy would be extended may subsequently drop coverage now that it is clear they won't be able to off-set the high cost of COBRA."
Under the COBRA law, terminated workers may continue employer-sponsored health coverage by paying 100 percent of the health care premium plus an additional 2 percent to cover administrative costs. This translates to roughly $8,800 a year in COBRA health care costs for the average worker.
Enacted in March 2009, the COBRA subsidy under the American Recovery and Reinvestment Act of 2009 (ARRA) required eligible employees to pay only 35 percent of the COBRA premium, or about $3,000 a year for the average worker. The subsidy lasts for up to 15 months for workers who were involuntarily terminated between September 1, 2008 and May 31, 2010.
Get more: Obama's COBRA subsidy is the latest significant example of why clients need help navigating COBRA administration. But first brokers need to educate themselves. Don't miss "A broker's guide to COBRA changes" in the September issue of Benefits Selling.
More COBRA subsidy coverage from BenefitsPro
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