A new subsidy that goes into effect March 1 could make health insurance more affordable for millions of laid-off workers. But some businesses fear it could also raise employer health care costs.
The stimulus package signed into law this week by President Obama subsidizes 65 percent of the health insurance premiums for individuals laid off between Sept. 1 and the end of this year.
Under the federal Consolidated Omnibus Budget Reconciliation Act, or COBRA, laid-off workers can continue their former employer’s health coverage for up to 18 months. In the past, though, they were required to pay the entire premium, plus a 2 percent administrative fee, making COBRA unaffordable for most jobless workers. Average COBRA premiums exceed $400 a month for individuals, and more than $1,000 a month for families.
Employers must notify former employees who are eligible for the new subsidy by March 1.
If You Provide It, Will They Come?
It’s not clear how many laid-off workers will actually enroll. “It will be more affordable than in the past,” says , senior vice president for health reform at the American Benefits Council. “But it may not be affordable for some.”
Laid-off employees who didn’t sign up for COBRA when they lost their jobs will have 60 days to enroll. Those who signed up and have been paying full premiums won’t get a rebate, but their payments will drop in March.
Employees who left voluntarily or retired are still eligible for COBRA, but not the subsidy, says Kathryn Bakich, senior vice president and head of the health care compliance practice at Segal Co.
Employers, and the companies they hire to manage their COBRA programs, are scrambling to meet the March 1 deadline to notify employees, Dennett says. But an even greater concern for employers is how higher COBRA enrollment will affect their insurance costs.
The most likely candidates to take advantage of the subsidy are individuals with health problems, says Tom Billet, senior benefits consultant with Watson Wyatt. Those individuals are also more likely to seek medical care for themselves and their families before their coverage expires, he says. “That’s always an issue with COBRA. … You’re paying for it, you only have a certain amount of time on it, so you want to use it.”
But Bakich says the subsidy is generous enough to attract healthy individuals, who would lower overall insurance costs because they’re less likely to file claims. “What I’m hoping is that people will opt in even if they don’t have a lot of (health care) expenses,” she says.
