Hewitt Research Continues to Show High Rate of COBRA Enrollments Among Subsidy-Eligible Employees
December 23 2009 - 10:15AM
Business Wire
A new analysis from Hewitt Associates, a global human resources
consulting and outsourcing company, indicates that average monthly
enrollment rates in COBRA health care plans among subsidy-eligible
employees have increased by 20 percentage points since the COBRA
subsidy was enacted in March 2009. This comes as President Obama
recently signed the Department of Defense Appropriations Act for
Fiscal Year 2010, which includes a law that lengthens the duration
of the COBRA subsidy from nine months to 15 months for eligible
employees and their dependents. It also extends the subsidy to
those Americans who lose their jobs on or before February 28,
2010.
Hewitt’s analysis examined the COBRA enrollment activity for 200
large U.S. companies representing 8 million employees from March
2009 to November 2009. During that period, monthly COBRA enrollment
rates for subsidy-eligible employees averaged 39 percent, compared
to 19 percent for the period of September 2008 to February
2009—prior to when the subsidy was enacted.
“The increase we’ve seen in COBRA enrollments since March
highlights how important the subsidy benefit has been to families
who have been affected by the high rate of unemployment,” said
Karen Frost, Hewitt’s Health and Welfare Outsourcing leader. “The
subsidy provides laid-off Americans with a cost-effective way to
continue getting health insurance coverage, and we expect
enrollment rates to remain high until the subsidy expires or the
labor market shows signs of improving."
The COBRA subsidy under the American Recovery and Reinvestment
Act of 2009 (ARRA) requires eligible employees to pay 35 percent of
the COBRA premium, or about $3,000 a year for the average worker.
Under the original COBRA law, most involuntarily terminated workers
were required to pay 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.
COBRA Enrollments by Industry
Since the subsidy was enacted in March 2009, Hewitt’s analysis
shows that companies in the industrial manufacturing and aerospace
and defense industries saw the largest overall increases in COBRA
enrollment rates for subsidy-eligible employees. In the industrial
manufacturing industry, for example, COBRA enrollment rates for
eligible employees rose from 7 percent (September 2008 to February
2009) to 67 percent (March 2009 to November 2009). In addition,
companies in the aerospace and defense industry saw the rate of
COBRA enrollments more than double, from 30 percent (September 2008
to February 2009) to 63 percent (March 2009 to November 2009).
Industry Breakdown of Average Monthly COBRA Enrollment
Rates
Avg. Monthly
Enrollment
Sept. 2008 – Feb. 2009
Avg. Monthly Enrollment
Mar. 2009 – Nov. 2009
Aerospace & Defense 30% 63% Automotive &
Transport 25% 33% Banking 29% 50%
Business Services 20% 42% Chemicals 9%
19% Computer Hardware/Services 22% 40% Construction
6% 26% Consumer Products 54% 65%
Electronics 55% 75% Energy & Utilities 13%
22% Financial Services 27% 34% Food &
Beverage 12% 27% Health Care 10% 18%
Industrial Manufacturing 7% 67% Insurance 23%
40% Leisure 11% 28% Media 13%
36% Pharmaceuticals 20% 44% Retail 9%
24% Telecommunications 27% 44% Other 5%
16%
Cross Industry Average 19%
39%
About Hewitt Associates
For more than 65 years, Hewitt Associates (NYSE:HEW) has
provided clients with best-in-class human resources consulting and
outsourcing services. Hewitt consults with more than 3,000 large
and mid-size companies around the globe to develop and implement HR
business strategies covering retirement, financial and health
management; compensation and total rewards; and performance, talent
and change management. As a market leader in benefits
administration, Hewitt delivers health care and retirement programs
to millions of participants and retirees, on behalf of more than
300 organizations worldwide. In addition, more than 30 clients rely
on Hewitt to provide a broader range of human resources business
process outsourcing services to nearly a million client employees.
Located in 33 countries, Hewitt employs approximately 23,000
associates. For more information, please visit www.hewitt.com.
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