COBRA Jumps After Subsidies Kick In

When it comes to health-care safety nets, one of the oldest and leakiest is COBRA, the 1986 law that allows workers to continue their employer-sponsored health insurance for a while after they leave their companies.

Adek Berry/Getty Images

COBRA subsidies take a bite out of costs.

But there has been a big catch—the price. Historically, COBRA has required people pay the full premium for the coverage plus a 2 percent administrative fee. Somebody who just lost a job isn't likely to have oodles of spare cash to do that.

Enter the federal stimulus package, which starting on February 17, added a 65% government subsidy for COBRA coverage for laid-off workers. More than 14 million people are eligible for the sweetened benefit, and lots of them are using it, according to an analysis by Hewitt Associates, the human resources consultants.

Hewitt surveyed big employers and found that COBRA-enrollment rates doubled to 38 percent during the four months ending in June compared with a four-month period ending in March.

The jump "shows that for a lot of people the full cost of Cobra was a barrier and now with the government stepping in to help, people are more able to afford it," Karyn Schwartz, a policy analyst for the Kaiser Family Foundation, told Bloomberg.

Back in March, the Kaiser Family Foundation figured the COBRA subsidy would reduce the average cost of maintaining family coverage to $377 per month from $1,078 without it. The subsidy is available to qualifying people laid off through the end of 2009.