COBRA is the federal program that allows workers to hold onto their health insurance benefits after a job loss. The new law subsidizes 65 percent of COBRA premiums for some workers for up to nine months. News of the subsidy has generated confusion and frustration in addition to a bit of relief.

COBRA coverage typically is available for 18 months but at a steep price; the formerly employed person usually pays 100 percent of the premium plus a 2 percent administrative fee. The unfortunate fact is that this is when the average person is least able to afford the full premium on his/her own. Not only has the person just lost her job but her health insurance premiums typically double under COBRA coverage. That is also why only 10 percent of eligible persons take advantage of COBRA coverage. The coverage is expensive, but it can be an important option for people who may not be able to find new coverage due to preexisting conditions.

There are a few key things to know about the new COBRA subsidy:

- Timing and eligibility. The new federal subsidy will cover 65 percent of premiums for nine months. It’s available only to workers who lose their jobs between Sept. 1, 2008 and Dec. 31, 2009.

- Filing deadlines. Generally, you need to file for COBRA coverage within 60 days of leaving your job. But under the economic stimulus law, if you lost your job but didn’t elect COBRA, you’ll have 60 days to make an election and get the subsidy after you receive a notification from your old employer of the subsidized rates and that you are again eligible.

- The subsidy. If you’re eligible, you’ll pay premiums equal to 35 percent of the total to your former employer’s plan; the plan will receive the difference through reduced payroll taxes that they would have paid to the federal government, or through a refund under certain circumstances. The subsidy is limited to nine months.

- Income caps. The subsidy is only available to individuals with maximum adjusted gross income of $125,000, and $250,000 for married couples filing jointly.

The Salt Lake Tribune published an informational article on the new law’s effect on business. It was also picked up by the AARP Bulletin Today. Diversified’s Diane Malin was quoted in the SL Trib article:

Benefits threatened » Diane Malin, an account executive and human resource specialist at the Diversified Insurance Group, said the federal subsidy penalizes companies for going “above and beyond.”

If the government is offering to pay more than half of a laid-off worker’s COBRA premium, it no longer makes sense for a company to chip in as part of a severance package, she said.

“There’s no incentive for them to do that any longer,” Malin said, “and there’s actually a disincentive if they do.”

Worse yet, about 11 percent of companies surveyed by the Employers Council said they may not be able to continue offering health insurance to their workers at all. A company that doesn’t offer benefits to begin with isn’t obligated to extend enrollment in a group plan via COBRA.

That avenue may become increasingly appealing to the 22.8 percent of companies that indicated in the survey that they’re planning to reduce their work forces in the “near future.”

But, said Engar, “I think most employers want to do the right thing, and for so many of them, having to lay people off has been very, very difficult for them. They want to take care of their people as much as possible.”

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I was doing some internet research on clinical trials for one of our clients yesterday and ran across a piece that was quite interesting and relevant to any company contemplating clinical trials. It is actually over a year old, but the information is just as current and appropriate today. I found it on ClinPage which is a daily online publication about the operational aspects of clinical trials.

If you’re a small sponsor getting ready for a clinical trial, plan on shelling out at least $10,000 to $25,000 more per year than the actual cost of that study.

This is not for investigators who suddenly want more money, or for extra recruiting efforts. It’s for clinical trial insurance. And it’s a must.

“Most trials won’t move forward unless the sponsor has insurance,” said Julie Davis, a managing director with Chicago-based insurance brokerage Aon Corp. While such insurance isn’t required by law in the U.S., she says, venture capital backers and hospitals who work with a sponsor won’t even get involved in a trial if the insurance isn’t in place.

Litigious Environs

“We’re in such a litigious environment here in the U.S. now, it’s just a prudent business practice,” added Tom Konopka, senior vice president of business development and marketing for Medmarc Insurance Group, an underwriter of clinical trials insurance.

The clinical trials insurance business—product liability coverage designed to respond to claims brought by study subjects or their families for bodily injury—has been around as long as there have been clinical trials. But only in the last decade has the field seen the emergence of underwriters who specialize in it, said Davis. Today, in the U.S., those are Medmarc, Chubb, CNA Insurance and ACE Group of Companies. There are, of course, more brokers who market and sell this insurance to sponsors, yet even that field is relatively small. But it’s picking up steam.

More Drugs; More Insurance

Why? Several factors are coming together, said Davis. Increasing government involvement in clinical trial regulation is causing all in the industry to be more careful, and fearful of lawsuits. In addition, the introduction of drug distribution by mail in trials has added a layer of risk.  Then there is the fear brought about by the drug disasters of recent years, and the fact that more lawyers are specializing in bringing claims on behalf of clinical trial subjects. The push in the industry for drugs to be developed faster is also a factor.

“The push to make trials shorter can add risk,” said Davis. “If you have a product you’re trying to go out with in one year versus three years, underwriters will want to know what the shortcuts are that you’re going to be taking, and what the risks are that are associated with that.”

The Matrix

Cost varies widely. Konopka said that calculating the price of clinical trial insurance is not unlike working with a Rubik’s cube. Among the multiple factors to be considered in the matrix: Is it a Phase I, II or III study? How many subjects? Is the protocol in order? Is the informed consent document airtight? How quickly and successfully was the sponsor able to recruit subjects for its last trial? How good is the reputation of the contract research organization (CRO) that’s doing the recruiting?

Konopka said most sponsors buy a yearly policy instead of insuring each trial separately. And many of the firms that have ongoing trials just roll the cost of trial insurance into their overall policy.

Big Dogs Opt Out

Interestingly, most big pharmaceutical companies don’t buy clinical trial insurance. Some may instead have a dedicated risk management division on the premises. Or they know that their cash reserves are enough to handle any settlements that need to be made. “Their balance sheet allows them to take on more risk,” said Davis. Others may buy such insurance, but will opt for a huge deductible because of their financial position, she added.

Medical device developers should purchase between $1 million and $5 million in coverage annually; drug makers probably need between $5 million to $10 million.

Complications for CROs

Buying insurance is fairly straightforward for sponsors, but it’s not so for CROs. “For CROs, it gets interesting,” said Ty Howe, national practice leader for CROs at insurance brokerage firm Marsh, Inc.

CROs, he explained, must purchase vicarious bodily injury risk, as they will likely get sued along with the sponsor, hospital and investigator, if a test subject is injured. And then secondly, they need liability insurance for claims that could be brought by the sponsor if the sponsor feels the CRO failed in any of its duties.

And these days, along with the rest of the research industry, clinical trials insurance brokers and underwriters have had to go international, opening offices around the globe and coming up to speed on trials-insurance requirements in different countries (for instance, in France and Germany, it’s against the law to go without clinical trials insurance).

—by Suz Redfearn