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How much does COBRA coverage cost?

COBRA lets you maintain your health insurance for a period if you lose your job, but keeping your employer’s health plan is pricey. 

COBRA is a safety net. The idea is to give you a health insurance bridge between jobs. It’s not meant as a long-term solution. 

The COBRA plan works exactly like your employer plan. It’s the same health coverage and provider network. The one difference is that COBRA can cost four times more than what you pay in premiums under an employer-based plan. 

 

What is COBRA insurance?

COBRA stands for the Consolidated Omnibus Reconciliation Act. It helps people who lose health insurance because of a change of job. 

Not everyone is eligible for COBRA continuous coverage. The coverage is only for private-sector companies with at least 20 employees and state and local government.

It’s available to people who quit their job or are: 

  • Laid off.
  • Fired and it wasn’t for “gross misconduct.”
  • Without insurance because an employer cuts your hours.
  • Without coverage because of a divorce, a spouse’s death or other qualifying events.

COBRA also covers your dependents even if you don’t sign up for the coverage. Reasons for why dependents might get coverage include if:

  • You die.
  • Your child turns 26 and drops off a parent’s plan.
  • There’s divorce or legal separation.
  • You sign up for Medicare.

COBRA has a time limit. You get to keep your employer coverage for 18 months. You can request an extension if you or a dependent is disabled or you face a qualifying event. That includes a spouse’s death. 

 

How much does COBRA cost?

COBRA’s coverage is just like your employer-sponsored plan. However, the costs are high. That’s because you have to pay for all of the coverage. 

The employer no longer chips in for coverage. Instead, you’ll have to pay for all the costs plus up to 2 percent administrative costs. The monthly COBRA costs will depend on the cost of the health insurance plans. 

Kaiser Family Foundation estimated that the average annual premium for employer-sponsored health insurance family coverage was nearly $20,000 in 2018. That was a 5% jump from the previous year. 

Employees paid on average about $5,500 for that coverage. Without an employer picking up the remaining money, those same employees would pay an average of nearly $20,000 plus an up to 2% administration fee. That’s about four times more for the same employer-sponsored plan.

COBRA is expensive, but it gives you peace of mind that you’ll have the same plan temporarily. 

 

How to sign up for COBRA 

Your employer should contact you with paperwork about COBRA within 30 days of your last day or if you become eligible for Medicare. Your job can also inform your spouse about the coverage if you die. 

You should notify your employer within 60 days if you or a dependent become eligible for COBRA because of a divorce. The same is true if a child turns 26 and is no longer covered by a parent’s insurance. 

You and your dependents have 60 days to sign up for COBRA. You don’t have to enroll immediately. Coverage is retroactive for when you become eligible, which is usually your last day of work. 

You can cancel COBRA at any time within 18 months. This might happen when you get another job. Your employer may also cancel your plan if you stop paying premiums or if it stops offering health insurance. 

 

Why get a COBRA plan -- and when it’s not a good idea

COBRA makes sense in some situations. Here’s why you may want COBRA and when you likely want to avoid it. 

 

Why get COBRA

  • You really want to keep your same health plan. 
  • You want to make sure you get to keep your doctors.

 

When not get COBRA

  • Your new employer offers a similar or better health plan. 
  • Your spouse is eligible for a similar health plan with lower costs.
  • You’re eligible for lower-cost insurance, such as Medicaid or an Affordable Care Act (ACA) marketplace plan. 

There are other options to COBRA that could cost you less. Likely cheaper options include Medicare, Medicaid, an ACA plan, your spouse’s employer’s health plan or a short-term health plan. People often get confused by Medicare and Medicaid. Here are the differences

Short-term plans are usually cheaper than regular health plans, but they may not provide the same level of patient and consumer protection. Short-term plans are available for one year with the chance for two renewals. 

You may also find a less expensive plan in the individual market. The ACA exchanges offer individual plans that have income-based subsidies. However, if you make more than 400% of the federal poverty limit, you can look for an off-market plan. Those are usually more expensive than a subsidized ACA plan, but could still be cheaper than signing up for COBRA. 

Whether COBRA is the right choice for you depends on what you want from your health plan and how much you’re willing to pay for it. 

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