The new health benefits continuation subsidy has led to a sharp increase in the percentage of departing workers who take up continuation benefits.
Consultants at Hewitt Associates Inc., Lincolnshire, Ill., have published that conclusion in an analysis based on a review of Consolidated Omnibus Budget Reconciliation Act continuation benefits activity at 200 large U.S. employers.
From March to June, the percentage of U.S. residents at the companies who were eligible for COBRA benefits and actually enrolled increased to 38%, up from 19% for the period extending from September 2008 through February, before the COBRA subsidy provision was signed into law.
Employers previously could require involuntarily terminated workers to pay 102% of the health care premiums to continue their group benefits.
The new COBRA law permits involuntarily terminated workers to pay just 35% of the premiums. Employers pay the rest of the premiums and administrative costs, and the government is supposed to reimburse employers for the 65% of the premiums that they are paying.
Under the old rules, departing employees paid an average of about $8,800 for COBRA continuation benefits. Under the new rules, the average has dropped to about $3,000 per year, Hewitt consultants estimate.
Employees in group health plans who still have their jobs pay an average of about $1,900 per year for their share of health coverage, the consultants estimate.
Despite the availability of the 65% subsidy, 62% of involuntarily terminated employees who were eligible for COBRA benefits failed to sign up for them.
“The COBRA subsidy significantly reduces the cost of health care coverage for workers who were laid off. However, the average American may still find it difficult to pay for this benefit when they have less income coming in, which is perhaps why enrollment numbers didn’t jump higher,” said Karen Frost, Hewitt’s Health and Welfare Outsourcing leader.
“It’s possible these laid off workers are simply seeking coverage with a new employer or through their spouse’s employer,” says Karen Frost, a Hewitt outsourcing expert. “Unfortunately, it’s also likely that some are just foregoing health insurance altogether.”