Aon: COBRA Changes May Sting

By NU Staff

April 19, 2009 at 08:00 PM

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Efforts to help laid-off workers keep health coverage may squeeze their former employers.

Researchers at the consulting arm of Aon Corp., Chicago, have published data hinting at that possibility in a summary of results from an informal survey of 374 benefits buyers and other employer representatives who participated in a benefits Web seminar.

Aon asked the participants about how they think the move to require employers to administer a new health benefits continuation program might affect the employers' overall health care costs.

The government will be paying 65% of the premiums for eligible, involuntarily terminated workers who decide to take up Consolidated Omnibus Budget Reconciliation Act health coverage continuation benefits.

The terminated workers must pay the rest of the premiums, but employers and group health plans must absorb the cost of finding the workers, notifying them about the new COBRA subsidy, and collecting the payments.

About 42% of the survey participants said the COBRA subsidy will not increase their companies' overall health care costs, but 58% are expecting the subsidy program to increase health care costs.

About 23% of all of the survey participants are expecting a COBRA-related cost increase of 1% to 5%, and 30% are expecting an increase 6% to 15%, according to calculations based on Aon figures.

Another 5% of the survey participants fear the subsidy program could increase health care costs more than 16%, according to calculations based on Aon figures.

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