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COBRA Enrollment Rates Remain High Despite Subsidy's End
Enrollments dipped slightly but stayed higher than pre-subsidy levels

By Stephen Miller  9/1/2010

U.S. workers continued to enroll in COBRA for health care insurance at high rates despite the end of the government COBRA subsidy. One out of five terminated employees enrolled in COBRA coverage in June 2010—the first month where the subsidy was not available—which was almost twice as high as historical, pre-subsidy enrollment rates, according to an analysis by consultancy Hewitt Associates.

"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 2010 expecting that the subsidy would be extended might drop coverage now that it is clear that they won't be able to offset 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 typical worker.

Enrollments Higher than Historical Averages

Enacted in March 2009, the COBRA subsidy under the American Recovery and Reinvestment Act (ARRA) required eligible employees to pay only 35 percent of the COBRA premium, or about $3,000 a year for the typical worker. The subsidy lasted for up to 15 months for workers who were terminated involuntarily between Sept. 1, 2008, and May 31, 2010.

Hewitt analyzed COBRA enrollment rates for workers who were terminated voluntarily or involuntarily from their jobs since 2004. This analysis of 200 large U.S. companies, representing 8 million employees, shows that the average COBRA enrollment rate for these employees and their dependents was 21 percent in June 2010. This was significantly higher than the historical monthly average enrollment rate (12 percent) but slightly lower than overall enrollment rates during the period that the COBRA subsidy was available to involuntarily terminated employees (25 percent).

When looking only at the subset of workers who were terminated involuntarily and eligible for the COBRA subsidy, 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.

Stephen Miller is an online editor/manager for SHRM.

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