Have you ever been on COBRA? You are misinformed. It’s by NO means “free”. The former employee pays both his or her former contribution AND the employer’s former contribution, along with an “administration fee.” The only people getting any sort of cushy deal from COBRA are the health insurance companies who set the rates and collect the money.
Here are the facts about who pays what for COBRA:
“When you were an active employee, your employer may have paid all or part of your group health premiums. Under COBRA, as a former employee no longer receiving benefits, you will usually pay the entire premium amount, that is, the portion of the premium that you paid as an active employee and the amount of the contribution made by your employer. In addition, there may be a 2 percent administrative fee. While COBRA rates may seem high, you will be paying group premium rates, which are usually lower than individual rates. ....Although they are not required to do so, some employers may subsidize COBRA coverage.”
Anyone who was laid off between Sept 1 2008 and May 31 2010 gets a free COBRA ‘subsidy’. Despite what you may have read, this ‘subsidy’ is actually paid by the employer not the govt. That is, the employer pays the COBRA premium directly to the health insurance company. The employer must later file with the IRS to ask to have the amount offset against the employer’s tax return at some later date.