New Data Indicates COBRA Subsidy Helped Middle-Class

May 20, 2010 ( – A new report suggests that the COBRA premium subsidy provided by the American Reinvestment and Recovery Act has helped Americans maintain insurance coverage during the recession, especially the middle class.

According to the report from the U.S. Treasury Department Office of Economic Policy, over the course of several months during the fall and winter of 2009, the Princeton University Survey Research Center (PSRC) collected weekly survey data on a representative sample of some 6,000 New Jersey workers on Unemployment Insurance. After adjusting for the fact that the highest-income households are ineligible for the ARRA COBRA subsidy, it found 80% of individuals using the COBRA subsidy are in households with annual income between $30,000 and $134,000, the middle three quintiles of the New Jersey household income distribution.  

Roughly 15% of respondents reported having insurance through COBRA. However, after taking into account the main eligibility requirements for the ARRA subsidy, the Treasury estimates that between a quarter and a third of subsidy-eligible workers utilized the COBRA subsidy for continuing health insurance.  

The report said a sudden flattening in the growth of the uninsured adult population began around the time that employers and employees received guidance on the ARRA COBRA subsidy, and the large participation in the COBRA program by unemployed middle-class workers could have been a major contributing factor to the relative stability in the share of Americans without health insurance since February 2009.  

The 65%, 15-month COBRA premium subsidy is currently available to workers involuntarily terminated through May 31 (see COBRA Subsidy Eligibility Extended). An analysis from Hewitt Associates in December 2009 indicated that average monthly enrollment rates in COBRA health care plans among subsidy-eligible employees increased by 20 percentage points since the subsidy was enacted (see Subsidy Boosts COBRA Enrollments).  

To date, individual-level data on COBRA enrollment since the Recovery Act is only available for New Jersey, but the Treasury’s report said the data is representative of the U.S. because New Jersey’s economic performance has closely mirrored that of the nation as a whole during the recession, and New Jersey is typical of the nation as a whole with respect to overall health insurance coverage.  

The report is here.