Many laid-off employees unfamiliar with continuation of health coverage

WALTHAM, Mass.--(BUSINESS WIRE)--According to new research by Alegeus, almost half (41%) of 1,096 American adults surveyed in April 2023 are unfamiliar with The Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA provides continuing group health insurance coverage for employees and their families after a job loss or other qualifying event.

More than 185,000 employees across the country have been laid off to date in 2023 (Layoffs.fyi). With further job cuts looming, both employees and employers need to understand common knowledge gaps when it comes to continuation of health coverage—especially where 78 percent of adults have factored healthcare spending into their finance-related resolutions this year.

Key research findings point to:

• Employees look to their previous employer for help with COBRA costs—35 percent of survey respondents have either received financial help from their previous employer or would expect it to pay some or all COBRA costs in the event of a layoff. Similarly, of respondents familiar with COBRA who have never used it (46%), more than half (58%) would use their severance from their previous employer to pay this cost. Employers can subsidize COBRA premiums for exiting employees.
• Employees rely heavily on their current health plans—Nearly half (47%) would be willing to pay a high premium to stay on their current plan. Of the aforementioned 46 percent of respondents familiar with COBRA who have never used it, the number willing to pay a high premium jumps to 62 percent, reiterating the value in employer-provided health insurance.
• A growing need for continuation of health coverage education—In addition to covering their COBRA costs, 33 percent of respondents feel their employer bears responsibility for explaining this coverage to them. In fact, employers are responsible for communicating COBRA requirements to all covered employees and their covered dependents. They must mail the Initial COBRA Rights Notice, which communicates COBRA rights, responsibilities and timelines, within 90 days of the first day of coverage.
• Many don’t realize they have access to tax-free savings accounts (HSAs) if they lose their jobs—and they can use those dollars for COBRA coverage premiums. Impacted employees should be prepared to take on any out-of-pocket (OOP) costs in the case of a layoff, as it’s up to the employer whether to subsidize all, some or none of the COBRA coverage. Fortunately, those who have opted into an HSA plan can make tax-free distributions to pay for these costs. However, many are unaware of this, and only 19 percent of respondents would use their HSA to pay for their COBRA insurance premiums.

The post-employment health benefits process is challenging to navigate as employers balance cost-savings while maintaining a positive reputation with impacted employees, many of whom face a daunting experience with unemployment. For both, having the right tools and resources in place—whether it be an HSA for an employee or a holistic benefit management solution for an employer—will provide safeguards in unpredictable situations.