Should I Consider Cobra Health Insurance?

Jan 10. 2025

Cobra Health Insurance: What It Is and Why It’s So Expensive

When you lose your job or experience a significant life change, one of the first things you may worry about is maintaining your health insurance coverage. For many individuals, the answer is COBRA insurance, a federal program that allows you to continue your employer-sponsored health insurance for a limited time after you leave your job. While COBRA can be a lifeline during times of transition, it is often much more expensive than you might expect. This article explores what COBRA insurance is, why it’s expensive, and what you can do to manage the costs.

What is COBRA Health Insurance?

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that gives employees and their families the right to continue their employer-sponsored health insurance for a period of time after certain qualifying events, such as:

• Job loss (voluntary or involuntary)
• Reduction in work hours
• Divorce or legal separation from the covered employee
• Death of the employee
• Eligibility for Medicare

COBRA is available to most private-sector employees, state and local government employees, and some employees of churches or religious organizations. The law applies to employers with 20 or more employees, and the coverage typically lasts for 18 to 36 months, depending on the type of qualifying event.

Why is COBRA Health Insurance So Expensive?

While COBRA allows you to keep your existing health insurance, it’s important to understand that it doesn’t come without a hefty price tag. Here’s why COBRA insurance tends to be so expensive:

1. You Pay the Full Premium

One of the primary reasons COBRA coverage is expensive is that, under the law, you are responsible for paying the full premium for your health insurance. When you were employed, your employer likely paid a substantial portion of your premium, leaving you with a smaller contribution (typically a percentage of the premium).

Under COBRA, since you are no longer an employee, you must pay the entire premium yourself. This includes the portion that your employer once paid, which can significantly increase the amount you owe each month.

2. Administrative Fees

In addition to the full premium, COBRA allows health insurance providers to charge an administrative fee of up to 2% of the premium. This fee covers the cost of administering COBRA benefits and managing the paperwork, but it further increases the overall cost of the plan.

3. Employer Contributions End

While employed, you may have enjoyed the benefit of your employer’s contribution to your health insurance. For example, an employer might have paid 70% or even 80% of the total premium, making the cost of your health insurance much more affordable. When you leave your job, this contribution ends, and you are left with the full cost of the premium, which can be a financial burden, especially if you were used to having the employer subsidy.

4. Health Insurance Plans May Be Expensive to Begin With

The cost of health insurance plans varies depending on the type of coverage (e.g., individual, family, HMO, PPO), the provider, and the plan’s benefits. Employer-sponsored plans are often subsidized, which means that they may not be as expensive as plans you would purchase independently on the health insurance marketplace. However, when you transition to COBRA, you are typically paying for a plan with more robust coverage than a standard marketplace plan, which makes it inherently more expensive.

How Much Does COBRA Health Insurance Cost?

The cost of COBRA insurance can vary widely based on several factors, including the type of plan you were enrolled in, your employer’s contributions, and the region where you live. However, here are some general figures to give you an idea:

• Individual Coverage: The average monthly cost for an individual COBRA plan can range from $400 to $1,500 or more, depending on the level of coverage.
• Family Coverage: For family plans, the cost can skyrocket, with typical premiums ranging from $1,000 to $4,000 per month.

These estimates reflect the fact that, on average, COBRA enrollees may pay anywhere from 102% to 150% of the original monthly premium (including administrative fees). For many people, this amount can be unaffordable, particularly if they are between jobs or facing financial strain.

Alternatives to COBRA Insurance

If COBRA is too expensive or not ideal for your situation, there are alternatives you may want to explore:

1. Health Insurance Marketplace

The Health Insurance Marketplace, also known as the Affordable Care Act (ACA) marketplace, provides health insurance plans with varying coverage and premiums. You may be eligible for subsidies based on your income, which could significantly reduce the cost of premiums.

• Special Enrollment Period: Losing your job and your health insurance is considered a “qualifying event” for a Special Enrollment Period (SEP), meaning you can enroll in a marketplace plan outside of the usual open enrollment period.
• Lower Costs: Marketplace plans may offer more affordable options than COBRA, especially if you qualify for subsidies based on your income.

2. Medicaid

If your income has dropped significantly due to job loss, you may qualify for Medicaid, which provides low-cost or free health insurance for low-income individuals and families. Eligibility requirements vary by state, so it’s worth checking with your state’s Medicaid office.

3. Short-Term Health Plans

If you only need coverage for a short period, such as between jobs, a short-term health insurance plan could be a more affordable option. These plans often have lower premiums but come with limited coverage and fewer benefits than ACA-compliant plans.

4. Employer Health Insurance for a Spouse

If your spouse is employed and has access to a health insurance plan, you may be able to join their employer’s plan. Some employers allow spouses of employees to join at the same time that the employee’s coverage is active.

Conclusion

COBRA health insurance offers a valuable safety net for those who lose their job or experience other qualifying events. It allows you to maintain your existing coverage for up to three years, but it can be incredibly expensive because you are required to pay the full premium, including your employer’s portion, along with any administrative fees.

While COBRA may be a good temporary solution, it is essential to explore other options, such as the Health Insurance Marketplace, Medicaid, or employer-sponsored plans, which may offer more affordable alternatives. Understanding your options and carefully assessing the costs and coverage of each can help you make the best decision for your health and finances during times of transition.

If you cannot afford Cobra Health Insurance We Have Many Affordable Options, contact us today and set an appointment and one of our Health Advisors would be more than happy to help you get the right Health Insurance Plan!