Understanding Cobra Health Insurance Cost: What You Need to Know
If you’re leaving your job or have been let go, there’s a good chance you may have heard of COBRA. The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 is a federal law that allows employees and their dependents to continue to be covered by their employer-sponsored health insurance plans for a certain period of time after they lose eligibility. However, the cost of continuing your coverage through COBRA can be much higher than you might expect. In this article, we’ll explore what you need to know about COBRA health insurance cost to ensure you’re well-informed before making any decisions.
How COBRA Works
COBRA requires employers with 20 or more employees to offer continued health coverage to those who have lost their eligibility for group health coverage due to a qualifying event, such as termination or reduction of work hours. Employees who qualify can continue their health coverage for up to 18 months, while dependents can continue coverage for up to 36 months.
The key thing to note about COBRA coverage is that the employee is responsible for paying the entire premium – both the employer and employee portions of the premium. In addition, a 2% administrative fee can be added to the premium for administrative costs. This means that if your employer covers 70% of your monthly insurance premiums, you will now be responsible for paying the full 100% of the premium, plus the 2% administrative fee.
The Cost of COBRA Coverage
COBRA premiums can be shockingly high, and can quickly eat into your savings if you’re not careful. According to a study conducted by the Kaiser Family Foundation, the average monthly COBRA premium for an individual was $599 in 2020, while the average monthly premium for a family was $1,756. To make matters worse, these costs can vary widely based on the type of coverage you had when you were employed, as well as the state you live in.
It’s important to note that COBRA coverage can be an expensive option compared to what you might be able to find on the individual market. If you’re relatively young and healthy, you may be able to find a cheaper plan that provides adequate coverage for your needs. However, if you have a pre-existing condition or require frequent medical care, you may find that COBRA is the best option for you.
How to Calculate Your COBRA Costs
To get an idea of how much your COBRA coverage will cost, reach out to your employer’s benefits administrator to inquire about your specific premium rates. Although individual rates can vary depending on your specific plan, it’s essential to have a general understanding of how much you can expect to pay. By calculating the cost of COBRA coverage ahead of time, you can make informed decisions about which health insurance options are best suited for your needs.
Alternatives to COBRA
If you find that COBRA rates are too expensive or your eligibility period has ended, there are alternative options for securing health insurance coverage. One option is to purchase an individual health insurance plan on the marketplace. Another option is to enroll in a short-term health insurance plan, which provides coverage for a temporary period of time. However, it’s important to note that short-term plans may not cover pre-existing conditions or offer the same level of coverage as a traditional health plan.
Final Thoughts
If you’re considering COBRA health insurance coverage, it’s essential to have a clear understanding of the costs upfront. By knowing what to expect and exploring different options available, you can make an informed decision about which type of coverage is best suited to your needs. While COBRA may be a viable option for some, don’t forget to explore all alternative options before making your final decision.
