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Analysis: COBRA Premium Subsidy Cost U.S. Government $34 Billion

March 16, 2011
Related Topics: Medical Benefits Law, Benefit Design and Communication, Latest News
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Measures Congress passed in 2009 and 2010 that established, expanded and extended COBRA premium subsidies for laid-off employees cost the federal government more than $34 billion, according to the Joint Committee on Taxation.
The first and most costly COBRA subsidy was embedded in a massive economic stimulus bill Congress passed in February 2009. That law provided a 65 percent, nine-month, federal premium subsidy for employees let go from Sept. 1, 2008, through Dec. 31, 2009.
The joint House-Senate panel estimated the subsidy cost the government $24.7 billion.
As part of a measure authorizing funds for the Defense Department in December 2009, Congress extended the subsidy to 15 months and made it available to those losing their jobs through Feb. 28, 2010. The Joint Committee pegged the cost of that expansion and extension at nearly $6.5 billion.
A measure Congress passed in March 2010 that further extended the subsidy to those laid off from March 1 through March 31, 2010, cost just under $1.1 billion, while a measure signed into law in April that extended the subsidy to employees laid off from April 1 through May 31, 2010, cost just more than $2 billion.
The April 2010 measure was the last COBRA premium subsidy extension lawmakers passed.
The Joint Committee report did not estimate how many employees and their dependents received the subsidies. However, an analysis by Hewitt Associates Inc.—now Aon Hewitt Inc.—found that COBRA enrollment rates among those laid off at 200 large employers doubled 38 percent after the subsidy began.  
Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
 
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