COBRA Survey: Recession takes hold
Riverwood, Ill. A recent survey has found that although more and more employees are becoming eligible for COBRA continuing health coverage due to layoffs, a smaller and smaller percentage are actually signing up due to its high cost.
The Spencer’s Benefits Reports 2009 COBRA Survey found that while 16.87% of employees became eligible for COBRA in the 2008 plan year at companies covered by the survey, only 9.69% of those eligible actually signed up for coverage.
“This is the highest percentage of employees becoming eligible and the lowest rate of election for COBRA coverage since Spencer’s first conducted a COBRA survey in 1989, but something we might expect given the severity of current economic conditions,” explained Stephen A. Huth, managing editor, Spencer’s Benefits Reports. “The 2009 survey will provide a baseline of COBRA experience at the height of a recession but before the temporary 65% COBRA subsidy in the American Recovery and Reinvestment Act took effect.”
COBRA costs in the 2009 survey averaged $10,988 per year per participant for employers, about 32% higher than five years ago when it was $8,353.
The $10,988 compared to an average annual cost for active employees of $7,190, making coverage for COBRA 54% more costly than that for active employees.
“Because COBRA beneficiaries must pay for the high cost of COBRA coverage, the trend of sicker beneficiaries choosing the coverage is not surprising,” Huth said. “In addition, although we talk about ‘average’ costs, the costs actually vary wildly from one company to the next for all but the largest employers. In part, this is because the low incidence of COBRA elections in any one company makes COBRA operate more like individual health insurance rather than like group insurance. Thus, providing COBRA coverage for most employers is much like rolling dice.”
Huth noted there are still positive aspects of COBRA that should not be overlooked.
“COBRA has provided substantial benefits, with an estimated 4.8 million individuals annually receiving coverage to which they may not otherwise have access,” he said. “This puts it in the same league as two sources of public health insurance for the nonelderly: individuals under age 65 covered by Medicare and people under age 65 covered by the military’s CHAMPUS/VA programs. It’s also provided the bridge in the insurance gap for individuals who want to take early retirement and enabled job mobility to employees who may otherwise not move to a more desirable job for fear of losing health insurance.”
The Spencer’s Benefits Reports 2009 COBRA Survey, conducted via the Internet and e-mail, represents the responses of 120 organizations with more than 1.6 million employees across the United States. Spencer’s Benefits Reports has been conducting the survey since 1989 and is produced by Wolters Kluwer Law & Business.
For a copy of the Spencer’s Benefits Reports 2009 COBRA Survey, contact Neil Allen at 847-267-2179, [email protected]; Brenda Au at 847-267-2046, [email protected]; or Leslie Bonacum at 847-267-7153, [email protected].