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CCH® BENEFITS — 10/29/09

Post-Subsidy COBRA Elections Increase Is less Than Expected

from Spencer’s Benefits Reports: COBRA elections after the 2009 premium subsidy was enacted increased from 12.4% to 17.7%, according to a recent report from Ceridian, which administers COBRA benefits for 50,000 employers nationwide. According to the report, “With the recent economic climate and large number of layoffs, this increase was lower than anticipated by lawmakers.” An earlier survey by Hewitt of large employers suggested that COBRA enrollments had doubled since the subsidy was enacted.

The Ceridian survey noted that election rates compared to income data by state revealed a fairly strong relationship: the higher the income, the higher the election rate.

The report noted that “the historically low COBRA usage rates were not greatly improved even with a 65% subsidy, primarily due to the high premium cost. This limited the economic benefits of this program and, in effect, added additional eligibility restrictions. Income levels and adverse selection will likely continue to drive COBRA usage, with potentially little correlation with unemployment.

“Second, and perhaps most importantly, is the indication that employers consider administrative ease a top priority. Keeping complexity to a minimum would improve adoption rates and the success of any government-sponsored program.”

For more information, visit http://www.ceridian.com/.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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