Monday, April 13, 2009

News You Can Use: Employers expect cost hikes due to COBRA subsidy

This likely won't come as much of a surprise, unfortunately, but new survey numbers from Aon show 60% of employers expect their overall health care costs to increase as a result of implementing the federal COBRA subsidy.

Polling some 300 employers who attended recent Aon COBRA webinars, the consulting firm finds 40% expect their overall health care costs to increase 1% to 5% because of the subsidy; another 40 percent expect costs to spike between 6% and 10%; 12 percent forecast increases from 11% to 15%; 8% expect an increase of 16% or more.

“Typically, 5% to 10% of former employees enroll in COBRA, and we expect that number to increase to 14% to 18% as a result of the subsidy. As employers begin to plan for their 2010 health benefits, they must take the new COBRA subsidy costs into consideration,” says Tom Lerche, Aon’s health care practice leader. “Most plan sponsors continue to experience a 7% to 11% health care cost trend rate, so additional costs from this subsidy will impact overall health care plan strategy for 2010.”

In addition to higher medical plan costs from utilization and adverse selection, plan sponsors will have higher administrative and communication costs, he adds.

In other words, start building these costs into the budget, pros. And don't cost your company more money by not having all the information. Visit, keyword "cobra" for in-depth EBN reporting on the subsidy and how you can prepare/protect yourself.

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