Unraveling the Cost of COBRA: How Much Will You Pay Monthly?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that allows individuals to continue their employer-sponsored health insurance coverage for a limited period after experiencing a qualifying event, such as job loss or divorce. However, one of the most significant concerns for those considering COBRA is the cost. In this article, we’ll delve into the average monthly cost of COBRA insurance and explore factors that influence the premium amount.

The Average Monthly Cost of COBRA Insurance

According to industry experts, the average monthly cost of COBRA insurance premiums ranges from $400 to $700 per individual. This figure may seem daunting, but it’s essential to understand the factors that contribute to the higher cost compared to employer-sponsored health plans.

When you were employed, your employer typically covered a significant portion of your health insurance premium. However, under COBRA, you are responsible for paying the entire premium, including the portion previously covered by your employer, plus an additional 2% administrative fee.

Factors Affecting COBRA Costs

While the average monthly cost provides a general guideline, several factors can influence the actual premium you’ll pay for COBRA coverage:

Location: The cost of health insurance can vary significantly across different states and regions. For instance, according to a study, the average monthly premium for individual health insurance in Alaska was $948 in 2024, while in Arkansas, it was $461.
Plan Type: The type of health insurance plan you had through your employer will impact the COBRA premium. Plans with more comprehensive coverage, such as lower deductibles and broader networks, typically come with higher premiums.
Family Size: If you need to continue coverage for your spouse or dependents, the COBRA premium will be higher than the individual rate.
Age and Health Status: Older individuals or those with pre-existing conditions may face higher premiums, as insurance providers factor in the increased risk of higher healthcare costs.

Calculating Your COBRA Premium

To get an accurate estimate of your COBRA premium, you’ll need to gather some information. Start by looking at your most recent pay stub or health insurance documentation to determine the following:

The amount you were contributing towards the health insurance premium
The amount your employer was contributing

Add these two figures together, and then multiply the sum by 1.02 to account for the 2% administrative fee. This calculation will give you an approximate monthly cost for continuing your employer-sponsored health plan under COBRA.

For example, let’s assume your contribution was $150 per month, and your employer’s contribution was $400 per month. The total premium would be $550 (150 + 400). Multiply this by 1.02 (550 x 1.02 = 561), and your estimated COBRA premium would be $561 per month.

Alternatives to COBRA

While COBRA provides continuity of coverage, the cost may be prohibitive for some individuals. In such cases, exploring alternative options can be beneficial. One popular alternative is enrolling in a health insurance plan through the Affordable Care Act (ACA) Marketplace.

Marketplace plans offer a range of coverage levels and premium costs, and you may be eligible for subsidies or tax credits based on your income level. Additionally, some individuals may qualify for Medicaid or other state-sponsored healthcare programs, depending on their financial situation.

It’s crucial to carefully evaluate your options and consider factors such as out-of-pocket costs, provider networks, and prescription drug coverage when choosing an alternative to COBRA.

Final Thoughts

The decision to continue health insurance coverage through COBRA is a personal one, influenced by various factors, including your financial situation, healthcare needs, and future plans. While the average monthly cost of COBRA insurance may seem high, it’s essential to understand that this cost reflects the full premium, without the employer’s contribution.

By being aware of the factors that influence COBRA premiums and exploring alternative options, you can make an informed decision that aligns with your healthcare requirements and budget. Remember, maintaining continuous health insurance coverage is crucial to avoid potential gaps in coverage and safeguard your financial well-being.

Everything you Need to Know about COBRA Insurance

FAQ

How do you calculate COBRA cost?

If you want to figure this out on your own, ask HR how much your employer is contributing toward your monthly coverage. Then, check your pay stub to see how much you’re contributing. After adding these figures, add another 2% (for the service fee). This will show you exactly how much you’ll expect to pay for COBRA.

How much does COBRA cost for one month?

COBRA health insurance puts all of the costs on the former employee. You no longer get any help from your previous job. The average monthly employer-sponsored group plans costs for a family plan are more than $1,600 with employees picking up less than $500 per month on average.

Is Cobra insurance worth it?

“If you’re close to meeting your deductible on your current insurance plan and you have high health care costs, it may be worth it to temporarily stay on your COBRA plan,” explains Donovan. The same holds true if you’re far into your employer plan’s year and have already met your deductible.

Why COBRA is so expensive?

You should expect COBRA insurance costs to be substantially higher than what you paid as an employee because your employer is no longer required to pay a share. In 2022, employees paid an average of $111 per month for an individual plan and $509 per month for a family plan, according to KFF.