A new analysis by Hewitt Associates, a global human resources consulting and outsourcing company, shows that many workers are continuing to enroll in COBRA for health care insurance, despite the high price tag and the end of the government COBRA subsidy. One out of five terminated employees in Hewitt’s analysis enrolled in COBRA coverage in June 2010—the first month where the subsidy was not available—which is almost twice as high as historical, pre-subsidy enrollment rates.

Hewitt analyzed COBRA enrollment rates for workers who were voluntarily or involuntarily terminated from their jobs since 2004. This analysis of 200 large U.S. companies, representing 8 million employees, shows that the average COBRA enrollment rate for these employees and their dependents was 21 percent in June 2010. This is significantly higher than the historical monthly average enrollment rate (12 percent) but slightly lower than overall enrollment rates during the period that the COBRA subsidy was available to involuntarily terminated employees (25 percent).

When looking only at the subset of workers who were involuntarily terminated and eligible for the COBRA subsidy, Hewitt’s analysis showed the average monthly enrollment rate was 38 percent, with enrollments peaking in June 2009 at 46 percent. For May 2010—the last month that the subsidy was available—the COBRA enrollment rate for involuntarily terminated workers was 31 percent.

“With the unemployment rate close to 10 percent, more Americans have to turn to COBRA as a way to access health insurance, especially for workers who are involuntarily terminated and either don’t have a new job right away, or don’t have a job with an employer-provided health plan,” said Karen Frost, Hewitt’s Health and Welfare Outsourcing leader. “However, enrollment rates will likely decline over time, as workers can’t—or aren’t willing to—afford the high premiums associated with COBRA coverage. Additionally, workers who enrolled in June anticipating the subsidy would be extended may subsequently drop coverage now that it is clear they won’t be able to off-set the high cost of COBRA.”

Under the COBRA law, terminated workers may continue employer-sponsored health coverage by paying 100 percent of the health care premium plus an additional 2 percent to cover administrative costs. This translates to roughly $8,800 a year in COBRA health care costs for the average worker. Enacted in March 2009, the COBRA subsidy under the American Recovery and Reinvestment Act of 2009 (ARRA) required eligible employees to pay only 35 percent of the COBRA premium, or about $3,000 a year for the average worker. The subsidy lasts for up to 15 months for workers who were involuntarily terminated between September 1, 2008 and May 31, 2010.

About Hewitt Associates

Hewitt Associates (NYSE: HEW) provides leading organizations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visit www.hewitt.com.

Copyright Business Wire 2010

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