COBRA Coverage Can Represent Big $$$ for Employers

January 3, 2007 ( - A survey by Spencer's Benefits Reports found that Consolidated Omnibus Budget Reconciliation Act (COBRA) claim amounts are costing companies about 45% more than such expenses for active employees.

According to a news story from the Society for Human Resource Management (SHRM), more than one-quarter of eligible employees decide they want health plan coverage after they leave their jobs as provided for by COBRA, the survey found.

The current finding that 27% of eligible employees opted for post-termination COBRA coverage was “among the highest percent of eligible employees to participate in COBRA since Spencer’s first conducted a COBRA survey in 1989,” said Stephen Huth, managing editor for Spencer’s Benefits Reports, in the SHRM story.

Compared to Spencer’s 2004 survey, employer costs for COBRA claims and active employees’ claims have increased 19% and 13%, respectively.

Specifically, the survey found that:

  • Average annual COBRA costs for employers were $9,914 in 2006, compared to an average annual cost for active employees of $6,831.
  • While administrative costs for COBRA varied significantly, the average cost was approximately $406 annually or about 4% of average claims costs.

In addition, the survey examined what employers felt were the primary difficulties with the COBRA law. Employers indicated that:

  • Their top concern was that beneficiaries can not afford the coverage, while they also worried about their own related costs.
  • They are concerned over the complexity of the rules and laws, and communicating the plan to participants and beneficiaries.
  • They are concerned about the difficulty in collecting premiums.