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CCH® BENEFITS — 12/05/06

Cost Of COBRA Was 145% Of Active Employee Cost, According To Spencer's 2006 COBRA Survey

Average claims costs for COBRA continuees exceeded costs for active employees by about 45%, according to the 15th nationwide survey of employers’ and plan administrators’ COBRA experience, conducted by Spencer’s Benefits Reports. The 122 companies responding to the 2006 survey administered COBRA for 11,949 former employees and 1,421 dependents who elected the continued coverage.

The survey, which collected information for the 2005 plan year, found that 10.1% of employees and dependents became eligible for COBRA continuation of coverage, and 26.6% of those eligible actually elected the health care coverage offered. The average annual health care cost for the companies that reported costs averaged $6,831 per employee/participant. This is 19% higher than costs two years ago ($5,721 in 2004). COBRA costs in the 2006 survey averaged $9,914 per year, 19% higher than two years ago.

The 2006 COBRA survey also identified the following primary difficulties in the continuation of coverage law:

The responses were notable for 2006 in that they continued at least one trend set in 2002. More responses than ever viewed the cost of COBRA as too high from the employee’s perspective.

Continuing the trend identified in previous Spencer surveys, costs for COBRA beneficiaries outstripped the costs for active employees. Also consistent with previous surveys, COBRA costs varied radically and unpredictably from employer to employer. Of the companies that could compare COBRA costs and active employee costs, 13% reported COBRA costs that were lower than active employee costs (25% in 2004). About 74% of the companies had COBRA costs between 100% and 200% of active employee costs (52% in 2004), and 13% had COBRA costs that were more than two times active employee costs (23% in 2004).

For more information, email spencereditor@wolterskluwer.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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