And I have a hard time believing a significant number of people actually attempt to game the system by waiting two months before choosing between individual coverage and COBRA. More likely, people are signing up for COBRA at the last minute after attempting to purchase cheaper coverage and having their applications rejected at the last minute.

Traditionally, the high cost of COBRA is an obvious artifact of the guaranteed issue/community rating rules for employer-sponsored insurance (ESI), coupled with the loss of the tax exclusion for people who are no longer working. With no tax incentive to keep them on the company plan, people who can find cheaper private coverage will do so, leaving higher-cost people on the group plan.

I would expect the number of COBRA beneficiaries to rise during a recession, so I don’t know how much of the rise to attribute to the tax credit. But I agree that a 65% credit was excessive (not to mention capriciously applied). A much smaller, more broadly applied credit would have made more sense to me; perhaps one that didn’t have all the ridiculous eligibility dates (I’d rather have seen a permanent 20% credit).

The tax credit should have had the effect of reducing average per-person medical costs of beneficiaries, by inducing healthier people to remain in the group, who otherwise would have moved to private plans. If the opposite occurred, it could only have been because high-cost people stayed on the rolls who otherwise could not have afforded coverage at all.