Benefit of COBRA Premium Subsidies Tallied; Program Expiration Has Important Implications
As Congress continues to debate whether to revive COBRA health insurance premium subsidies for laid-off workers, and other expiring elements of the 2009 American Recovery and Relief Act (ARRA), a United Hospital Fund analysis of a new federal study indicates that the program brought significant benefits to New York State workers and their families.
Under the program, involuntarily terminated workers who elect COBRA health insurance benefits are eligible for a 65 percent subsidy of family or individual premiums. Employer groups advance that portion of the premium to the health plan providing the coverage, and receive federal tax credits in return. As estimated by the Interim Report to The Congress on COBRA Premium Assistance (Department of the Treasury, June 2010), up to 130,000 New York households benefitted from over $155 million in premium assistance.
The report tracked quarterly tax returns from employers starting in the first quarter of 2009, when the program began, until early in 2010. Because of the data sources and timing of the report, which acknowledges “ambiguities,” it probably undercounts the number of individuals assisted and the amount of assistance New Yorkers received, and overcounts the number of households that received assistance. Some simple arithmetic produces a per-household benefit of only $1,200—unlikely, given that employer-sponsored coverage premiums averaged $400 for individuals and $1,100 for families in 2008. A per-household benefit of $4,000 for over 60,000 households is more likely (see explanation, at end of story, of how this figure is calculated, and download table to see revised benefit estimate).
It is worth noting that, since premium assistance is not worthwhile for single filers earning $145,000 or more under the terms of the program, most of this benefit flows to middle class families who are ineligible for coverage under New York’s public programs.
No Congressional proposals would extend the term of the COBRA subsidy beyond the existing fifteen months, and unless eligibility for the COBRA subsidy program is retroactively extended, as it has been three times previously, these developments have two implications for consumers:
· Workers who were involuntarily terminated from their employment and became eligible for COBRA on or after June 1, 2010, are not eligible to apply for the 65 percent monthly premium subsidy that the program provides; and
· While the expiration of the program does not affect workers currently receiving subsidy payments, those who receive the subsidy for its full term of fifteen months will be required to pay their full COBRA premium in order to maintain coverage beginning in the sixteenth month. For those who enrolled in the program at its inception in March 2009, subsidies ended on June 1, 2010.
The expiration of the COBRA premium subsidy also has important implications for policymakers. As the newly jobless, and those whose COBRA premium subsidies are expiring, shop for private coverage, they will find premiums for comprehensive coverage in New York’s individual market that are double or triple the unsubsidized premium of their previous employer-sponsored coverage—the same premiums that a dwindling number of existing policyholders are paying now.
The Fund’s Hard Times and Health Insurance guide contains information on other coverage options that consumers might consider should they be unable to afford their full COBRA premiums, or come to the end of their COBRA eligibility period. The U.S. Department of Labor publishes periodic updates on the COBRA subsidy program on its website, http://www.dol.gov/ebsa/COBRA.html.
Adjusting the Estimate of Benefit to New York
Employer tax returns report individuals for whom tax credits were claimed, not the number of individual or family policies subsidized, the number of people covered, or the length of the subsidized coverage. More importantly, the number of households the Treasury report estimates received assistance is a cumulative total representing credits claimed over two partial quarters and three full quarters, so the analysis double counts households for which employers claimed credits for one or more successive quarters. Since COBRA can last from eighteen to thirty-six months (the average enrollment is nine months), and ARRA premium subsidies can run for up to fifteen months, an overcount is inescapable. Finally, total premium assistance is likely understated, since only early returns from 2010 are included in the total.
Refining these two measures—households assisted and premium assistance—leads to a better picture of the value of the program to New York. Two methods were used by the Fund to adjust for household overcounts: simply using the full fourth-quarter 2009 figure; and creating a new total that counts only the quarterly increase in enrollment over the previous quarter’s total, rather than summing all quarterly totals. Making these adjustments suggests that just over 60,000 households received assistance. Adjusting the premium assistance figure, to replace the partial fifth quarter of returns with the full fourth-quarter 2009 assistance figure, brings the total to about $240 million. Putting these two adjustments together yields a more reasonable per-household benefit of $4,000.