The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) was intended to help prevent the loss of health insurance among workers and their dependents. When employees change or lose their jobs, private employers with 20 or more employees are required to continue health care coverage for workers and their qualified dependents where, in many circumstances, coverage would otherwise cease. However, even though COBRA requires employers to provide continued health care coverage, the act does not require them to continue subsidizing premium payments. Instead, plans are allowed to charge workers up to the entire premium plus a 2 percent administrative fee. Given the high costs of COBRA coverage, some previously insured workers and their dependents cannot afford this insurance and, therefore, may experience gaps in coverage-particularly in times of recession when unemployment durations can be long. To help workers who lost their jobs involuntarily during the "great recession" of the late 2000s, the American Recovery and Reinvestment Act (ARRA) provided large subsidies for premium payments to most COBRA-eligible people who experienced a job loss between September 2008 and May 2010. Despite the importance of COBRA as a potential source of health insurance, remarkably little is known about the number and characteristics of workers who might qualify for COBRA coverage or the personal and environmental factors that drive coverage. Additionally, there is not much rigorous evidence on the effects of the offer of the subsidy on COBRA coverage.

The U.S. Department of Labor (DOL) funded a study to fill the knowledge gaps about COBRA coverage and take-up, as well as to assess the impacts of the subsidy on COBRA coverage and other outcomes. Since there were no readily available data from a sample of COBRA-eligible individuals or subsidy-eligible individuals, the study analyses are primarily based on survey data collected from a large sample of unemployed workers who experienced a job loss in 2010.. The sample frame was constructed using administrative data on UI claimants from a geographically diverse set of nine states-Arkansas, California, Colorado, Florida, Georgia, New Jersey, Ohio, Pennsylvania, and Wisconsin. The total, sample included 28,513 UI claimants who filed a claim in 2010, with more than 10,000 UI claimants screened as part of the survey and 3,476 COBRA-eligible individuals who completed interviews. In order to estimate the impact of the COBRA subsidy on outcomes, the study compared the outcomes of subsidy-eligible individuals with similar individuals who were not eligible for the subsidy due to the timing of their job loss Some key findings include the following:

• While the ARRA subsidy increased COBRA take-up, it did not significantly reduce the share of workers who experienced gaps in health insurance or the total number of months that workers were without health insurance.
• Consistent with theoretical predictions, having access to the COBRA subsidy appeared to slow the return to work, but the small impact suggests that the subsidy was a minor disincentive.
• Eligibility for the subsidy did not affect financial wellbeing.
• Subsidy-eligible and subsidy-comparison workers were equally likely to report that they had trouble paying bills in the year following job loss or that financial trouble led them to sell property, withdraw money from retirement accounts, or move to a new place to live.