COBRA gets an extension ...
... but will the unemployed be able to afford it?
Unemployed workers got a helping hand just before the new year, but it’s still unclear how many ultimately can afford to take it. Congress extended a 65% premium subsidy for the COBRA health insurance program until Feb. 28 and the maximum period for receiving the subsidy another six months.
This means that most workers who lost their jobs after Sept. 1, 2008, can keep the health coverage they had through their employer at a discounted rate for up to 15 months.
The subsidy extension was tucked into a $363 billion fiscal 2010 defense spending bill, signed by President Barack Obama on Dec. 19.
“Millions of unemployed Americans and their families will be better able to afford and keep their health benefit coverage because of this new law,” said Phyllis Borzi, assistant secretary of the Employee Benefits Security Administration at the Labor Department, in a written statement.
COBRA—the Consolidated Omnibus Budget Reconciliation Act—allows workers to keep their health benefits up to 18 month provided they pay the full cost of the premium, including the employer’s share.
The original nine-month subsidy of 65% of the premium cost was included in the American Recovery and Reinvestment Act of 2009, also known as the stimulus law, signed by the president on Feb. 17, 2009.
The federal government has not yet released numbers on how many of the millions of jobless nationwide have taken advantage of the COBRA subsidy. The Internal Revenue Service is tracking uptake of the subsidy, but no official tally has been issued, a spokesman for the IRS said. The subsidy is given to the coverage provider, such as an insurer or employer, through a tax credit.
One new analysis suggests that the subsidy has allowed many more unemployed to keep their health benefits.
Average monthly enrollment rates in COBRA health plans have increased by 20 percentage points since the subsidy began in March 2009, according to the analysis by consulting firm Hewitt Associates released late last month.
Hewitt looked at COBRA enrollment rates for 200 large companies, with 8 million workers, from March to November 2009. During that time, monthly enrollment for those eligible for the subsidy averaged 39%, up from 19% before the subsidy went into effect, in the period of September 2008 to February 2009.
Some industry sectors saw COBRA enrollment skyrocket thanks to the subsidy, according to Hewitt. In the industrial manufacturing industry, enrollment rose to 67% from 7%. The retail sector also saw large uptakes of the COBRA program among laid-off workers (See chart).