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Tuesday, February 8, 2011

Health Insurance Continuation Coverage Under COBRA

Janet Kinzer
Information Research Specialist

Most Americans with private group health insurance are covered through an employer, or through the employer of a family member. About 80% of private employers offer health insurance coverage to their full-time employees, and most employers extend those health benefits to the families of their workers. In 2008, nearly 60% of Americans relied on employer-sponsored health insurance. As a result, a change in an individual’s work or family status can result in loss of coverage.

In 1985, Congress enacted legislation to provide the unemployed temporary access to their former employer’s health insurance for qualified individuals who lose coverage due to such changes. Under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA; P.L. 99-272), an employer with 20 or more employees must provide those employees and their families the option of continuing their coverage under the employer’s group health insurance plan in the case of certain events. The coverage, usually for 18 months, can last up to 36 months, depending on the nature of the triggering event. Employers who fail to provide the continued health insurance option are subject to penalties.

In February 2009, the Bureau of Labor Statistics (BLS) reported that the unemployment rate had reached 8.2%. In all 12.5 million persons were unemployed, with 2.6 million persons losing employment in the previous four months alone. Many of these individuals were eligible to continue their employer-sponsored health insurance, but did not elect coverage under COBRA because of the cost. On average, employees pay 27% of the premium for family coverage under an employer-sponsored health insurance plan. Those extending coverage through COBRA can be required to pay up to 102% of the premium, which averaged $13,643 for a family in 2009.

Congress addressed this issue under Title III of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5), signed into law on February 17, 2009. ARRA provisions included a temporary 65% subsidy for COBRA premiums. The COBRA subsidy, as amended by subsequent laws, is available to individuals who meet the income test and who are involuntarily terminated on or after September 1, 2008, and before June 1, 2010.

COBRA can be an important source of health insurance for the recently unemployed, the disabled, the retired, and their families. Since 2006, about 3 million individuals and families have used COBRA benefits each year. Critics argue that COBRA addresses the health insurance problems of only a small number of Americans, and that even with the subsidy, high premiums make COBRA coverage unaffordable to many of them. Others maintain that in requiring employers to provide former employees with the option of continuing their health insurance coverage, COBRA has resulted in extra costs for employers (in the form of increased premiums for employers’ group health insurance policies), as well as added administrative burdens.

This report provides background information on continuation health insurance under COBRA and on the COBRA population.

Date of Report: January 21, 2011
Number of Pages: 15
Order Number: R40142
Price: $29.95

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