Insurers Brace For Increase in COBRA Claims

The nation's ailing economy continues to affect insurance companies, which could also face a wave of costly COBRA claims as policyholders rush to get treatment before government subsidies expire.

The Associated Press reports: "The government's effort to help workers keep health benefits after they lose a job could wind up costing WellPoint Inc. and other insurers dearly in the fourth quarter. Indianapolis-based WellPoint said Wednesday it expects a spike in claims from a money-draining customer segment that includes people who continue their employer-sponsored insurance coverage under the federal law known as COBRA. Many insurers already face declining enrollment and rising costs related to swine flu cases. The expected jump in COBRA-related claims would make a bad situation worse."

"All these factors likely will contribute to future rate increases. Insurers normally lose money on COBRA enrollment because the people who keep their coverage generally do so because they need it for ongoing treatments or illness. WellPoint, for instance, spends between $1.50 and $2 on claims for every dollar it collects in premiums. Healthy people often pass on the coverage, which can be too expensive for someone who just lost a job, or they only sign up for it when they need treatment. People have 60 days after being laid off to enroll in COBRA. Earlier this year, the federal government started offering temporary subsidies that pay 65 percent of the cost of COBRA coverage. The first wave of those subsidies will start expiring in the fourth quarter. WellPoint officials expect an increase in claims as customers cram in as much health care as they can while they still have coverage" (Murphy, 10/28).

Source-Kaiser Health News
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