The Consolidated Omnibus Budget Reconciliation Act of 1985, also known as COBRA, is an option for some individuals who have lost their employer-sponsored health insurance coverage.
These individuals may have lost coverage for various reasons, such as job loss or other life changes. COBRA allows those individuals and their families to continue coverage under the original plan for a while.
The cost can vary and depends on factors like the type of health insurance plan you had, the number of people covered, and the state you live in.
If you’re wondering how much COBRA insurance costs, then keep reading. We outline the costs and more below.
What Is COBRA Insurance?
COBRA (Consolidated Omnibus Budget Reconciliation Act) insurance is a federal law that gives former employees, retirees, and their families the right to continue group health coverage at their own expense after they leave their employer.
Congress enacted COBRA in 1985 to help protect people from losing their health insurance when they left a job or experienced certain other qualifying events.
According to this act, employers with 20 or more employees must offer continuation coverage to departing employees and their dependents. The individuals covered by this insurance are referred to as qualified beneficiaries. They are usually provided a maximum of 18 months of coverage but can be prolonged up to 36 months in some cases.
The eligibility for continued coverage is extended to the employee, their dependents, and sometimes even divorced spouses or disabled children under certain conditions.
What Does COBRA Insurance Cost?
The cost of COBRA insurance coverage depends on various factors, including the type of plan you are applying for and the state in which you reside. Generally, most people pay around $623 for an individual and $1,633 for a monthly family plan.
If you are enrolled in COBRA insurance coverage, the government mandates that your employer cover a certain percentage of the total premium cost.
Most employers will cover up to 85% of an individual plan and 75% of family plans. This means you will pay the remaining portion of the total cost, which can be substantial depending on your coverage type and state of residence.
Additionally, specific individuals may qualify for a subsidy through COBRA, lowering their monthly premium cost depending on their circumstances.
COBRA insurance costs are typically influenced by the following factors:
- Number of covered individuals: The more dependents on the plan, the more expensive it becomes.
- The state in which you reside: Some states, with a higher cost of living, have higher monthly premiums.
- The COBRA plan you choose: There are various different plans to choose from. Some offer comprehensive coverage, but tend to be more expensive.
Average COBRA Premiums
Below are the average COBRA premiums based on your specific coverage and plan.
ALL-INDIVIDUAL PREMIUM
An all-individual premium is the most common type of COBRA insurance. This plan covers you and your dependents, if any, for all medical services, including hospital stays, doctor visits, prescription drugs, vision care, mental health care, and more.
The average monthly payroll deduction is about $101, and the monthly COBRA premium will range from $550 to $558.
INDIVIDUAL HDHP
Individual HDHP (High Deductible Health Plan) premiums are usually lower than all-individual premiums. They cover the same services but have higher deductibles and out-of-pocket maximums.
This plan’s average monthly payroll deduction is about $85, and the monthly COBRA premium will range from $400 to $417.
ALL-FAMILY PREMIUM
An all-family premium includes coverage for you and up to four family members. It covers the same services as an all-individual premium but will cost more due to additional dependents.
The average monthly payroll deduction is about $476, and the monthly COBRA premium will range from $1,500 and $1,564.
FAMILY HDHP
A family HDHP plan covers you and up to four family members for all medical services, with higher deductibles and lower premiums.
The average monthly payroll deduction is $383, and the monthly COBRA premium is $1,465. This amount can vary depending on the type of plan you select, the state in which you reside, the age of your family members, and any additional riders or supplemental coverage that you may choose to add.
How COBRA Premiums Work
On average, about 80% of COBRA premiums are covered by the employer and paid directly to the insurance provider. The remaining 20% of the premium is the enrollee’s responsibility and you must pay it directly to the insurance provider.
It’s important to note that COBRA premiums are subject to change over time. Depending upon your plan, coverage can increase or decrease while also changing price. It’s essential to keep an eye on these changes, so you know what costs you’ll be responsible for.
The cost of high-deductible plans is less than other plans, and may even offer additional discounts. They are also generally more cost-effective for those with relatively low medical expenses.
COBRA insurance works similarly to most other types of health coverage. Because you are paying a monthly premium, your provider pays for covered medical services and prescriptions up to their allowed amounts. The amount you pay out of pocket for care depends on the type of plan you select and any copays or coinsurance required by your policy.
It is important to remember that COBRA is a type of temporary insurance. Suppose you become eligible for another form of health insurance, such as through an employer or the Affordable Care Act (ACA). In that case, you will be required to switch policies and cancel your COBRA coverage.
It is also important to note that COBRA premiums can increase over time due to inflation and other factors. Your provider will notify you if your premium is increasing and will explain the reasons for the increase.
How To Work Out Your COBRA Premium
It’s the role of the HR department to work out COBRA premiums for employees leaving a job. However, if you intend to refrain from discussing your leave with the employer, you can work out an estimate.
The first and most important step is asking the HR department how much the employer contributes to your monthly health insurance. Knowing your pay sub-structure can help determine how much COBRA costs.
After finding out your employer’s contributions, add 2% to the total cost. This is a service fee that covers the administrative charges of COBRA coverage.
Here is a sample calculation of your COBRA premiums:
- Individual contributions: $300
- Employer contributions: $500
- Total cost of coverage: $800
- Service charge = 2% X 800 = $16
- Total COBRA premium = $800 + $16 = $816
You should also remember that the cost of your COBRA coverage will change every year, depending on healthcare costs in the area. It’s crucial to stay up-to-date with any changes in your premiums to adjust your budget accordingly.
COBRA Alternatives
If you don’t qualify for COBRA or decide it’s not the right fit, there are other options. They include:
HSA Or FSA
HSA (Health Savings Account) or FSA (Flexible Savings Account) plans are tax-advantaged savings accounts that can be used to pay for medical expenses. They have high deductibles and lower premiums, which makes them an attractive option for people who don’t expect to use their health insurance much.
These accounts are typically employer-sponsored, so you will need to check with your employer for details about eligibility and contribution limits.
Short-Term Health Insurance
Sometimes called temporary health insurance, these are policies that cover individuals for a period ranging from one month up to 12 months. They can be an excellent option for those in between jobs or who have recently graduated from college.
The premiums are usually lower than COBRA premiums. Still, the coverage isn’t as comprehensive, and there is often a limitation on how long you can stay covered.
Health Insurance Marketplace
The Health Insurance Marketplace has an array of health insurance plans under the Affordable Care Act (ACA) that can offer more comprehensive coverage at a lower cost than COBRA.
The marketplace is available for anyone who needs health insurance. The plans vary in coverage, deductibles, and premiums. You can shop around to compare different policies and choose the best one for your needs and budget.
Group Health Insurance
You may consider a group health plan if you cannot obtain health insurance through an employer. These plans are typically offered to members of associations or organizations and can be cheaper than individual policies.
Frequently Asked Questions About COBRA Insurance
How Long Does COBRA Insurance Last?
COBRA benefits typically last up to 18 months, although specifically qualified individuals may be eligible for an extension of coverage. Contact your former employer or insurance provider to determine if you qualify for a COBRA extension.
What Factors Impact The Cost Of COBRA Insurance?
The cost of COBRA insurance is determined by several factors, including the type of coverage you choose, the size of your family, and whether you select additional providers for your policy.
Additionally, some employers may subsidize the cost of COBRA insurance, which could reduce your out-of-pocket costs.
How Do I Qualify For COBRA?
To qualify for COBRA, you must meet certain conditions. These include experiencing an event that qualifies you for the program. Qualifying events can include job loss, decreased hours worked, divorce or the death of a spouse, and aging out of dependent status.
If your employer is a private company with 20 or more employees and offers group health insurance plans, then they likely provide COBRA coverage for employees.
Conclusion
At Enhance Health Plans, we can help you get a COBRA insurance plan that fits your budget and provides you with the necessary coverage.
We understand that COBRA can be confusing. But with our help, you can rest assured knowing you have the protection and peace of mind that comes with a quality insurance plan.
We’ll navigate the complex insurance landscape and help you shop for the best price, so you don’t have to worry about making a costly mistake. In addition to helping you find an affordable plan, we’ll also guide what coverage options are most beneficial for your situation.
Contact us today to get the affordable health coverage you need.
