Unemployed Americans aren't rushing to sign up for COBRA coverage.

According to the Spencer's Benefits Reports 2009 COBRA Survey, though 16.87 percent of employees became eligible for COBRA in the 2008 plan year at companies covered by the survey, only 9.69 percent of those eligible actually signed up for coverage.

"This is the highest percentage of employees becoming eligible and the lowest rate of election for COBRA coverage since Spencer's first conducted a COBRA survey in 1989, but something we might expect given the severity of current economic conditions," said Stephen A. Huth, managing editor of Spencer's Benefits Reports. "The 2009 survey will provide a baseline of COBRA experience at the height of a recession but before the temporary 65-percent COBRA subsidy in the American Recovery and Reinvestment Act took effect." (With the TARP subsidy, the cost to employees is $320.50 per month, or $3,845.80 per year.)

This is the 16th survey of COBRA coverage Spencer's has conducted since 1986, when the Consolidated Omnibus Budget Reconciliation Act (COBRA) was enacted. COBRA allows workers and their families who lose their health benefits due to certain circumstances the right to choose to continue group health benefits provided by their group health plan for limited periods of time. Qualified individuals may be required to pay the entire premium for coverage, plus up to 2 percent more for administrative costs.

COBRA costs in the 2009 survey averaged $10,988 per year per participant for employers, about 32 percent higher than five years ago. The $10,988 compared with an average annual cost for active employees of $7,190, making coverage for COBRA 54 percent more costly than that for active employees.

"Because COBRA beneficiaries must pay for the high cost of COBRA coverage, the trend of sicker beneficiaries choosing the coverage is not surprising," Huth said. "In addition, although we talk about 'average' costs, the costs actually vary wildly from one company to the next for all but the largest employers. In part, this is because the low incidence of COBRA elections in any one company makes COBRA operate more like individual health insurance rather than like group insurance. Thus, providing COBRA coverage for most employers is much like rolling dice."

The survey asked employers to identify their primary concerns with the COBRA law. The top two concerns, naturally, are cost-that incurred by employers, followed by the fact that beneficiaries can't afford the coverage. Other concerns include complexity of rules and laws, recently enacted COBRA expansions, and difficulties in collecting premiums.

Huth put the cost concerns in historical perspective.

"Concern with the cost of COBRA to employees hardly registered as a problem before 2002, but since then it has been at or near the top of the list," he said. "Of course, if many healthy employees feel they can't afford coverage, the cost of COBRA to employers rises as the covered population tends to be sicker. It will be interesting to see if the new 65-percent subsidy increases the percentage of people signing up for COBRA, or keeps them on COBRA longer."

Huth noted that there are positive aspects of COBRA that should not be overlooked. For example, an estimated 4.8 million individuals annually receive coverage to which they may not otherwise have access. COBRA also provides a bridge in the insurance gap for employees who want to take early retirement, and it enables job mobility for employees who may otherwise not move to a more desirable job for fear of losing their health insurance.

Spencer's Benefits Reports, a research service for employee benefits plan administrators, is produced by Wolters Kluwer Law & Business.