How Much Does COBRA Insurance Cost in 2021?

COBRA is a law that allows continued health insurance coverage for those in specific situations, such as a divorce, leaving a job, and Medicare qualification. COBRA, or Consolidated Omnibus Budget Reconciliation Act of 1985, allows workers and their families who lose their health benefits the right to continue coverage for a limited time under certain circumstances. The average monthly COBRA premium cost ranges between $417 for an individual to $1,564 for a family plan.

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The Cost of COBRA Insurance

In 2020, the average annual premium cost for employer-sponsored health insurance was $7,470 for individual coverage and $21,342 for family coverage. However, employers covered 83% of the costs for individuals and 74% for families on average.

With COBRA insurance, the individual becomes responsible for the costs the employer once was responsible for. This may result in paying average monthly premiums of $623 to continue your individual coverage or $1,778 for family coverage.

COBRA premiums range depending on if you have an individual or family plan. An individual plan may cost about $558 per month while a family plan can cost $1,564.

Average COBRA Premium Costs

Source: Aetna 

How COBRA Premiums Work

Most companies pay the majority of their employees’ health plan premiums, and the rest is deducted from your paycheck. On average, workers contribute 20% of the premium for individual coverage and 30% for family coverage. Under COBRA, however, you are responsible for the entire premium.

However, even though these costs are more than what you were previously paying, COBRA premiums are usually less than you’d pay on the open market because the group discount is still applicable to your plan.

During the next open enrollment period, you will have the option to switch to a less expensive plan if COBRA is not in your budget. Premiums for high-deductible health plans (HDHP) are considerably lower than other types of plans for both single and family coverage.

How To Calculate Your COBRA Premium

If you’re leaving your current job and decide to continue coverage with COBRA, the human resources (HR) department can help you determine your premiums.

You can also determine the cost of COBRA premiums on your own if you’d prefer not to discuss your leave with your employer. You can go about this by asking the human resources department how much your employer is contributing to your monthly health insurance coverage. By looking at your pay stub, you can also determine how much you are contributing. Add those two figures together, and add 2% more for the service fee; this is the amount you can expect to pay after you leave the company.

Let’s say, for instance, that you have $125 taken from each paycheck for health insurance. You get paid twice per month, so your portion of the monthly premiums is $250. If your employer contributes $400 per month, the total cost of your job-based plan is $650 per month.

To calculate your total monthly COBRA premium, add a 2% service charge to the $650 for a total of $663 per month.

Sample Calculation

Below we walk you through a sample calculation of how to determine your COBRA premium after leaving your employer.

Your contribution: $150 per paycheck X 2 = $300 per month

Your employer's contribution: $450 per month

Total contribution: $300 + $450 = $750 per month

Service charge: $750 x 2% (or 0.02) = $15 per month

COBRA premium: $750 + $15 = $663 per month

Alternatives to Using COBRA

If you prefer another option aside from COBRA, there are alternative healthcare alternatives you can utilize.

Health Insurance Marketplace

The Health Insurance Marketplace has health insurance plans under the Affordable Care Act (ACA) that is accessible to everyone. Each state has a health insurance marketplace where you can shop for insurance. It is also offered through the U.S. government if your state doesn’t have one. You can get a health plan through the ACA if you lawfully reside in the U.S. and are not in jail or prison.

This may be a good option for you if you want to shop around for a plan that’s within your budget. 

Short-term Health Insurance

Short-term health insurance can allow you to access healthcare while you’re uninsured until you can get long-term health insurance. With short-term plans, you can usually get approved quickly and start coverage right away. You can also apply outside of the open enrollment window, unlike other health insurance plans. 

It’s important to know, however, it’s possible to get denied short-term health insurance if you have a pre-existing condition. It may also not provide coverage for specific healthcare such as maternity care or mental health. The time frame for short-term health plans is between one month to just under one year. The length of time you are covered will depend on the state you live in.

Use an HSA or FSA

Health savings accounts (HSA) and flexible savings accounts (FSA) are ways to set aside money to pay for healthcare expenses. Some expenses that can be covered by money set aside in an FSA or HSA include copayments and coinsurance. 

When you leave your job, all of the money you contributed to your HSA or FSA account is still yours. If you decide to switch to a new high deductible health plan (HDHP) or keep your existing HDHP via COBRA, you can continue to put money into your HSA. If you have money in your HSA when you leave your job, you can use those funds to pay for COBRA premiums or health insurance premiums paid while you’re receiving unemployment benefits.

COBRA Frequently Asked Questions (FAQs)

Below we outline frequently asked questions when it comes to COBRA insurance.

What is COBRA insurance?

COBRA allows for healthcare benefits to temporarily continue for workers and families during times of transition, job loss, and more. The time period of this extended coverage varies and depends on the reason for the loss of healthcare coverage. During this time, however, you are expected to pay the premium your employer once covered for you.

Generally, employers must provide COBRA coverage if they …

• Are a private company with 20 or more employees or a state or local government
• Have at least 20 employees for more than half the business days in a year
• Offer group health insurance plans to current workers

Any employee who was insured when experiencing a qualifying event can elect to continue coverage under the employer’s group health plan. The covered employee’s current or former spouses and children are also eligible when a qualifying event affects them.

How do I know if I qualify for COBRA?

According to the Department of Labor, to qualify for COBRA, you must fall under three conditions to be considered for coverage:

• You must have an event that qualifies you for COBRA coverage.
• COBRA must cover your group health plan.
• You must be a beneficiary that is qualified for the specific event under COBRA.

Generally, employers must provide COBRA coverage if they …

• Are a private company with 20 or more employees or a state or local government
• Have at least 20 employees for more than half the business days in a year
• Offer group health insurance plans to current workers

How long does my COBRA coverage last?

Federal coverage for COBRA lasts 18 months, starting when your previous benefits end. Some states extend medical coverage (but may not include dental or vision) to 36 months. You should check with your benefits manager to find out whether your state extends COBRA benefits.

Some benefits have a lifetime limit, but that’s not the case with COBRA. Each time you enroll, you’re that's entitled to the same benefits for the same period of time.

COBRA Coverage Period Based on Qualifying Even

Source: Insure

How long do I have to decide if I want to use COBRA?

When you leave your job or suffer certain qualifying events, your employer must notify the health plan administrator within 30 days. The plan administrator must then inform you about your rights and the process for making a COBRA election within 14 days of getting the notice.

You and your dependents will have at least 60 days to elect COBRA coverage, and each person who qualifies can decide independently whether to elect coverage. So, for example, if you were insuring yourself and your spouse, you could continue coverage only for yourself, only for your spouse, or for both of you.

To maintain your COBRA rights, you can be required to make your first insurance premium payment within 45 days from when you sign up for coverage and then make subsequent payments promptly.

Bottom Line

COBRA is an option to extend health insurance benefits when you're no longer employed by your employer. While COBRA may induce extra costs for health insurance, it can be a good option to get health insurance during a qualifying event. If COBRA isn't the right fit for you, there are other options such as short-term insurance, using an HSA or FSA, or Mira, which provides healthcare benefits for only $45 per month.