COBRA Premium Subsidy Helped Fewer Than Expected « Health Insurance Advisory

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COBRA Premium Subsidy Helped Fewer Than Expected

Author: Pete S - Sr. Staff Writer | Nov 13 2010 | General Provisions - New Healthcare Law

“The federal subsidy to assist laid-off American workers pay for continued major medical insurance through the COBRA program helped fewer individuals than expected, partly because COBRA premiums remained unaffordable for many families even with the subsidy,” according to the nonpartisan Employee Benefit Research Institute (EBRI).

As part of congressional efforts to help individuals deal with the recent economic recession, the American Recovery and Reinvestment Act of 2009 (ARRA) provided for the federal government to pay 65 percent 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. The subsidy was made available for up to nine months, and was extended by Congress three times, with the last extension occurring in April 2010.

In assessing how the program performed, EBRI notes there are widely conflicting estimates of how many people benefited from the COBRA subsidy, but generally there has been lower-than-expected take-up of the subsidy. EBRI used the latest data from the U.S. Census Bureau’s Survey of Income and Program Participation (SIPP), a nationally representative survey, as the best available benchmark.

“The COBRA subsidies that became available in April 2009 do appear to have had an impact on the percentage of non-workers with coverage through a former employer,” said Paul Fronstin, director of EBRI’s Health Research and Education Program. “But they appear to have assisted far fewer than the originally estimated 7 million individuals.”

Fronstin said these findings have implications for the impact of the subsidies that will become available in 2014 under provisions of the Patient Protection and Affordable Care Act of 2010 (PPACA), and may mean the number of uninsured may not fall as much as predicted.

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.

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 generally excluded from taxable income, COBRA premiums are generally not tax deductible.

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