The 65% premium subsidy enacted to help recipients pay for benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) failed to substantially increase use of the program a new study finds.
The study by the Employee Benefit Research Institute sought to quantify the impact of the subsidy provided for by the American Recovery and Reinvestment Act of 2009. While the subsidy paid 65% of the premium for individuals who were covered under COBRA and who incurred an involuntary job loss between Sept. 1, 2008, and Dec. 31, 2009, fewer than expected took advantage of it.
“The lower-than-expected take-up may be due to the fact that, even after the subsidy, COBRA premiums may not be affordable for many families, especially at a time when they have seen a decline in income,” the report states. “Health insurance premiums averaged $4,824 a year for employee-only coverage and $13,375 for family coverage in 2009. After the subsidy, premiums would be $1,688 for employee-only coverage and $4,681 for family coverage. Furthermore, whereas premiums for current workers’ employment-based coverage are either excluded from taxable income or reduce taxable income, COBRA premiums are generally not tax deductible.”
While the numbers were less than expected, an estimated 700,000 individuals did partake. Moreover, this estimate does not include the family dependants who likely would also have benefited from the subsidy.
“Between April and August 2009, the percentage of nonworking adults with coverage through a former employer increased from 8.8 % to 9.4 %,” the report states. “The number with coverage through a former employer increased from 5 million in December 2008 to 5.7 million in August 2009, suggesting about 700,000 nonworking adults received the subsidy.”
Register or login for access to this item and much more
All Digital Insurance content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access