How much does COBRA Health Insurance Cost?
COBRA's cost can vary based on several factors, but the bottom line is that it probably won't be cheap. While your employer subsidized a major part of your health insurance cost while you were employed, COBRA laws state that your employer or plan administrator can pass along up to 102% of the actual health coverage cost to the COBRA recipient. The additional 2% is to cover plan administrative costs. Here is an illustration:
Health coverage cost while you were employed
- Monthly cost of your health insurance policy: $600
- Amount paid by your employer while you were employed: $400
- Your monthly share of the cost while you were employed: $200
Health coverage cost of the same plan under COBRA
- Monthly cost of your health insurance policy: $600
- Amount your administrator can charge you for COBRA: 102%
- Your monthly share of the cost under COBRA $612
In this generic example, COBRA coverage would cost you $412 more than what the same insurance was costing you while you were employed. Is it worth it? According to our health coverage hierarchy of needs, which insists that you at least work to insure yourself against catastrophic medical bills, yes (if you can afford it). The risk of a $25,000 hospital bill as a result of a simple accident is real and significant.
The main drivers of the cost of COBRA will be:
- The health plan characteristics - a more comprehensive plan costs more
- The number of employees in the firm - larger companies get better insurance rates
- Geography - some locations will have higher insurance premiums because of lack of competition
Some employers will help offset the cost of COBRA. They may do this because it was part of an original offer package, because it was offered or negotiated in a severance package, or simply because they want to be helpful to ex-employees.