How much does COBRA Health Insurance cost per month?
The Consolidated Omnibus Budget Reconciliation Act, or COBRA, was passed in 1986 as a way for people to maintain their health insurance benefits after losing their jobs. For many people, maintaining health insurance between jobs is imperative, as a loss of benefits at any point may disqualify them from getting health insurance later due to preexisting conditions. Unfortunately, COBRA coverage can be prohibitively expensive, so it may be impossible to pay for on unemployment income.
How Does COBRA Health Insurance Work?
When health insurance is offered as an employment benefit, it’s usually offered as part of a group policy. Group-rate health insurance is usually much cheaper than a private policy due to shared risk. If you do not have a job, you do not qualify for group insurance and may have a difficult time finding a private health insurance policy that will accept you. In order to soften this problem, COBRA was enacted.
COBRA allows people who have lost their jobs to continue receiving health insurance through the same company as their group health policy. This helps keep health insurance coverage current, since a lapse in coverage can sometimes prevent a person from having their preexisting conditions covered.
The insured can choose whether to carry on the coverage for their family or just as individuals. The coverage is available for up to 18 months after the loss of a job, although the insured is not locked into keeping the coverage for this entire period if they do not want to.
How Much Does COBRA Cost?
Unfortunately, despite COBRA being offered by the same company as the group health insurance, the insured cannot get it for the same rate. In fact, COBRA coverage is generally substantially more expensive than what the insured was paying out of their paycheck while at work. Most employers soak up a portion of insurance costs so that employees only need to pay a small portion of the cost.
COBRA costs the full amount of a person’s insurance premium plus an additional fee to cover the administrative costs. This generally works out to 102% of the old cost of health insurance. With group health policies already costing several hundred or thousand dollars each month, this can be devastating to people on unemployment.
As an example, a family COBRA policy might cost around $1,000, and an individual COBRA policy would cost about $300. These prices may vary depending on the original cost of your policy. Considering that most unemployment compensation payments are usually well under $2,000 a month, insurance costs become prohibitively high through this program.
How to Save Money on Healthcare When Unemployed
A government program in 2009 allowed individuals to receive COBRA coverage for a substantial discount. Unfortunately, this program ended in 2010, and employees now must face the full price of COBRA while between jobs. This coverage may be too expensive for them to consider, so families face difficult choices. Here are a few ways that people can obtain affordable healthcare if they cannot afford COBRA:
– While employed, set up a health savings account (HSA)
This allows you to deposit untaxed money into a bank account; these funds can then be used to cover healthcare expenses. Once money is deposited into your HSA, it’s yours, and you do not lose it after losing your job or insurance policy. You can use this money as an emergency fund while unemployed.
– Apply for Medicaid
If you’re unemployed or have a low income, you can get health insurance through Medicaid rather than relying on the much more expensive COBRA policy. This is especially true for families with children, as Medicaid coverage for children is substantially more affordable than a family COBRA policy.
– Use Free Clinics
Some low-income neighborhoods have free or reduced-cost clinics where you can get affordable healthcare. In some cases, these clinics actually provide cheaper services to people without insurance than to people who have coverage. The quality of care may be lower than through other doctors, but it should be sufficient for basic needs like getting antibiotics to combat an illness.
If at all possible, it’s important to have a backup plan in place before quitting your job. If the job loss happens unexpectedly, you may be able to get healthcare without COBRA by taking advantage of Medicaid or finding a private health insurer that can provide you with affordable coverage. It may not be cheaper to buy a private policy, but it may be in some situations, and it’s certainly worth investigating.