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Expired COBRA Subsidy Gets Mixed Reviews

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The temporary health benefits continuation subsidy helped some involuntarily terminated workers but came nowhere close to providing “universal coverage.”

Researchers at the Urban Institute, Washington, give that assessment in a review of the 65% federal COBRA group health continuation premium subsidy that Congress included in the in the American Recovery and Reinvestment Act (ARRA) of 2009. The subsidy expired May 31.

Before the subsidy took effect, workers had to pay 102% of the full cost of employer-sponsored health coverage to continue benefits. Now that the subsidy has expired, workers must once again pay 102% of the cost, rather than 35%.

The Urban Institute researchers say estimates of the effects of the COBRA subsidy on COBRA take-up rates vary, with Ceridian Corp., Minneapolis – a firm that manages benefits programs for a wide range of employers – reporting that take-up rates at client employers had increased to about 18%, from about 12%.

“Most of the before-and-after take-up rates presented above likely underestimate ARRA’s effects on its target population of job losers because they do not compare the same types of people before and after ARRA.

Enrollment figures from one benefits firm suggest that workers who signed up for COBRA when the subsidy was available might have been somewhat healthier than the workers who sign up for unsubsidized COBRA coverage, the researchers say.

The researchers found that federal efforts to promote the program were effective and that implementation seemed to go reasonably well, under the circumstances.

But the fact that studying the effects of the ARRA COBRA subsidy is so difficult suggests that implementing the Affordable Care Act, the health system change act that includes the Patient Protection and Affordable Care Act, might be more difficult than policymakers had expected, the researchers warn.

The COBRA subsidy program experience suggests that the secretary of the U.S. Department of Health and Human Services may have difficulty getting large amounts of new types of insurance information from employers and health benefits administrators, unless employers or administrators already are generating the data for private business purposes, the researchers say.

“Careful attention to the costs and benefits of new data requests or requirements should be paid in implementation, as it would be easy to create considerable political ‘push back’ for data elements that are not vital to effective early oversight of health plans,” the researchers say.

The COBRA subsidy program also has shown that policymakers will have to arrange for very high subsidies and very easy enrollment to enroll all or nearly all newly unemployed people, the researchers say.

“Interviewees from all perspectives agreed that even subsidized COBRA premiums are too high to help a great many potential enrollees,” the researchers say.

Even paying 35% of the full cost of health coverage is too much for many, the researchers say.

Encouraging high coverage continuation rates can help insurers as well as unemployed individuals, by minimizing the possible effects of adverse selection, the researchers say.


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