COBRA Enrollments Up as Businesses Layoff Employees

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August 18, 2009
COBRA Enrollments Spiked in Most Industries Experiencing Mass Layoffs
LINCOLNSHIRE, Ill. ???A new analysis from Hewitt Associates, a global human resources company, reveals that COBRA enrollments have doubled since the U.S. government enacted a new subsidy to make health insurance more affordable to millions of laid-off Americans.

With unemployment rates at their highest in over 25 years1, more than 14 million workers are now eligible for the Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidy under the American Recovery and Reinvestment Act of 2009 (ARRA). Hewitt’s analysis examined the COBRA enrollment activity for 200 large U.S. companies representing 8 million employees. From March 2009 to June 2009, monthly COBRA enrollment rates for Americans eligible for the subsidy averaged 38 percent, up from 19 percent for the period of September 2008 through February 2009.

Under the original COBRA legislation, involuntarily terminated workers were required to pay 100 percent of the health care premium plus an additional 2 percent to cover administrative costs. According to Hewitt data, this translates to roughly $8,800 a year in COBRA health care costs for the average worker. Under ARRA, eligible workers receive a nine-month subsidy that leaves them responsible for paying only 35 percent of the COBRA premium, or about $3,000 a year. Hewitt research shows that on average, workers with employer-sponsored health coverage pay 22 percent of the premium cost, or $1,900 a year.

“The COBRA subsidy significantly reduces the cost of health care coverage for workers who were laid off. However, the average American may still find it difficult to pay for this benefit when they have less income coming in, which is perhaps why enrollment numbers didn’t jump higher,” said Karen Frost, Hewitt’s Health and Welfare Outsourcing leader. “It’s possible these laid off workers are simply seeking coverage with a new employer or through their spouse’s employer. Unfortunately, it’s also likely that some are just foregoing health insurance altogether.”

COBRA Enrollments by Industry
According to Hewitt’s research, companies in the industrial manufacturing industry saw an 800 percent increase in COBRA enrollments since the subsidy was enacted. COBRA enrollments rose from 7 percent (September 2008 to February 2009) to 59 percent (March 2009 to June 2009). Enrollments for companies in the construction, leisure, and retail industries tripled.

“There are a number of reasons why COBRA enrollments may vary across industries, but clearly there is a heavy correlation between enrollment rates and those industries where companies are making significant layoffs,” explains Frost. “If unemployment continues to rise as predicted, employers should expect and prepare for COBRA enrollments to remain at their inflated levels, particularly since the subsidy is available to those workers laid off through the end of 2009.”

Industry Breakdown of Avg. Monthly COBRA Enrollments

  August-2008 to February-2009 March-2009 to June-2009
Cross Industry Average 19% 38%
Aerospace & Defense 30% 71%
Automotive & Transport 25% 52%
Banking 29% 57%
Business Services 20% 44%
Chemicals 9% 20%
Computer Hardware??& Services 22% 40%
Construction 6% 22%
Consumer Products Manufacturers 54% 41%
Electronics 55% 62%
Energy & Utlities 13% 24%
Financial Services 27% 37%
Food & Beverage 12% 28%
Health Care 10% 12%
Industrial Manufacturing 7% 59%
Insurance 23% 36%
Leisure 11% 28%
Media 13% 29%
Pharmaceuticals 20% 41%
Retail 9% 26%
Telecommunications Equipment & Services 27% 53%
Other 5% 17%

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

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