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COBRA Program Subsidies to Expire at End of August

August 11, 2011
Related Topics: Finance/Taxes, Benefit Design and Communication, Policies and Procedures, Latest News
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A popular government program that subsidized COBRA health insurance premiums for millions of laid-off employees will end this month.

Under the COBRA premium subsidy program, which was included as part of a huge economic stimulus bill Congress passed in February 2009 during the peak of the recession, the federal government pays 65 percent of COBRA premiums for involuntarily terminated employees.

Since then, Congress several times extended the program in which premium subsidies are provided to laid-off employees for up to 15 months. The last extension—approved in April 2010—extended the subsidy to those let go though May 31, 2010.

For employees who were laid off in May 2010 and have been unemployed since, their 15 months of COBRA premium subsidies will expire at the end of August.

Amid growing congressional worries about a public backlash against measures that would increase the federal budget deficit, the action Congress took in April 2010 to extend the subsidy to those laid off through the end of May marked the end of subsidy extensions.

The exact number of individuals who took the subsidy isn’t known. At the time the original subsidy legislation was passed, congressional analysts estimated that the subsidy would aid more than 7 million laid-off employees and their families and cost the government about $25 billion.

The subsidy had a dramatic effect on COBRA enrollment. A study conducted last year by Hewitt Associates Inc.—later acquired by Aon Corp.—found that the COBRA take-up rate among terminated employees working for large employers roughly doubled after the subsidy was available.

Initially, for employers, the COBRA subsidy created a lot of work as organizations had to locate laid-off employees and tell them of their new right to subsidized coverage. But over time, administrative problems eased.  

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

 

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