Unemployment can quickly lead to uninsurance if a newly-laid-off worker doesn’t buy into COBRA. That’s the reality since the monthly cost of COBRA consumes, on average, about 84% of the average monthly unemployment payment for American workers. This calculation was made by Families USA in 2009, appropriately titled, Squeezed.

When I wrote about COBRA here exactly one year ago, I posited that without significant subsidies, the newly-unemployed would quickly morph into the newly-uninsured.

I can happily report that subsidies began to flow to laid off workers last spring and this led to a pick-up in COBRA enrollment throughout 2009.
The chart illustrates the take-up of COBRA comparing the periods September 2008-February 2009 with March-November 2009. Overall, enrollment in COBRA was 19% of eligible workers in the earlier period, compared with 39% in the latter.

Thus, COBRA subsidies virtually doubled COBRA enrollments across workers in all industries. Under ARRA, the subsidy is 65% of the COBRA premium, requiring the worker to pay 35%.

There is substantial variation by worker sector, however. The highest rate of COBRA enrollment in 2009 was in manufacturing and aerospace/defense, with 2 in 3 laid-off workers signing up for COBRA in these sectors. The lowest proportions of unemployed workers enrolling in COBRA, even with the subsidy, were in health care, chemicals, construction and leisure.

These data come from an analysis by Hewitt Associates, published in December 2009.

Health Populi’s Hot Points: Hewitt’s report came out on 23rd December, on Christmas Eve-Eve; to me, the COBRA subsidy is one of the best gifts that can be imagined in these recessionary times.

The COBRA subsidy has been extended to workers who lose their jobs through February 2010. In the current jobless recovery, what will happen to workers who continue to lose their jobs, as well as unemployed people who bought into COBRA whose benefit periods pass?

As the the demand for COBRA is very elastic — that is, as the price increases the expressed demand for the insurance (e.g., the willingness to pay for it) falls — we may well see declines in the COBRA enrollment rates later in 2010 such as those reflected back in 2008.