Study Finds COBRA Subsidy Benefit Below Predicted Levels

October 15, 2010 ( – A new Employee Benefit Research Institute (EBRI) research report suggests the recent COBRA subsidies designed to help laid-off workers keep health coverage ended up helping fewer people than predicted.

However, EBRI researcher Paul Fronstin said the subsidies that became available in April 2009 appear to have had a major impact on the percentage of nonworkers with coverage through a former employer. Between April and August 2009, that figure increased from 8.8% to 9.4%, according to the EBRI report.

Fronstin said Census Bureau data indicated the number of nonworking Americans with coverage through a former employer rose from 5 million in December 2008 to 5.7 million in August 2009, suggesting about 700,000 people benefitted from the money. Fronstin said the subsidies were predicted to help 7 million people with the COBRA subsidies during 2009.

The subsidies were contained in the American Recovery and Reinvestment Act of 2009, and involved the federal government paying 65% of the premium for individuals who were covered under COBRA and who incurred an involuntary job loss between September 1, 2008, and December 31, 2009. The subsidy was made available for up to nine months, and was extended by Congress three times, with the last extension in April 2010.

The lower-than-expected take-up rates for the subsidy may be because COBRA premiums may not be affordable for many families with declining incomes even with the government aid and, Fronstin commented, “since health insurance is expensive even with the subsidy.”

According to the EBRI researcher, the finding may have implications for subsidies scheduled to be available 2014 under the recent health-care reform law.  “Those subsidies may not have as large an effect as predicted when (health reform) was passed,” Fronstin observed. “As a result, the number of uninsured may not fall as much as predicted.”

He noted that data through December 2009 are expected to be available by January 2011, when he said it will be possible to look at the subsidies’ impact for the entire 2009 calendar year.

The research report is at

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).