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The cost of COBRA Explained
One of the questions we hear most often is why is COBRA insurance so expensive? And we hear this for good reason. It is shocking when you realize just how much COBRA will cost, normally over $1000 monthly for a family, which is a huge price tag, especially since most people considering COBRA are in a difficult financial situation already due to job loss. So let's get under what makes COBRA insurance so expensive. There are two main reasons - the fact that you must pay the full premium and the fact that employer group health insurance plans are extremely expensive. Let's explore those some more.
The first reason that COBRA coverage costs so much is that for the first time you have to pay the full premium.
Normally employers absorb a large part of your health insurance costs. They pay a portion of the monthly premium, sometimes up to 90%, as a benefit of being an employee. Under COBRA laws, since you are no longer an employee, the company no longer has to pay some of the cost of the plan. This means you are now responsible for paying the entire cost. For example, let's pretend that your employer paid 75% of your health insurance cost and you paid 25%, or $300 monthly. Now instead of paying $300 monthly, you will have to pay the full $1200. You can find out how much both you and your employer paid by looking a recent paystub.
The second reason that COBRA is so expensive is that employer sponsored medical insurance plans are very expensive.
Let's talk about why. On a group health insurance plan at a company, the plan covers everyone who works there and in virtually all cases, covers everyone regardless of their current health or medical needs. Now while this is a very good thing, it makes the insurance very expensive. Since the insurance company is insuring all kinds of people on the plan - healthy and not healthy, high risk and low risk, with or without serious medical needs/preexisting conditions - the cost of the overall group plan increases substantially to cover people who need frequent medical attention. The plan is expensive because it covers people with all sorts of preexisting conditions and risk factors who frequently use expensive medical care.
When people use COBRA to continue their group health insurance plan, they continue to pay for the expensive coverage that covers everyone at the company. But what about if you are generally healthy? Well, then you can save a lot of money by getting your own private plan. On a private plan you will only pay for your own insurance, which is based on how healthy you are and your risk levels. When those are low, the cost decreases dramatically. Many people find they can cut their expenses for premiums by up to 70% when they use a private plan and can still get excellent coverage. You can learn more about what plans are available in your area below by getting a free quote.
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