What Should I Do When COBRA Coverage is Too Expensive?

COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is a federal law that gives workers and their families the right to keep their employer’s group health plan after that insurance ends due to job loss or changes in the immediate family. COBRA plans can be very expensive and can cost between $400 and $700 per month per individual. Fortunately, there are ways to reduce the cost and alternatives to keep you and your family covered. 

About COBRA 

COBRA is a set of laws determined by the Department of Labor (DOL) to provide employees with protection from the possibility of losing their health insurance coverage. Under COBRA, employers with group health and have 20 or more full-time employees must offer an extension of group health insurance to qualified employees for a period of 18 to 36 months.   

COBRA plans are the exact same plan that you were offered by your employer, except much more expensive, because your employer is no longer covering part of the cost; So its important to know what is included, the terms and conditions of your employer plan before considering COBRA. 

COBRA plans can be expensive, as you then become responsible for the entire insurance premium. On average, COBRA plans cost between $400 and $700 per month per individual, so if you have a family of 4 —the other members listed as dependents — your monthly cost can be as high as $2,800. 

Qualifying for COBRA 

It's important to note that not every employee automatically qualifies for COBRA coverage. To be eligible for COBRA, you must meet all three of the following requirements: 

1. Your current health plan must be subject to the COBRA law
2. You must be considered a qualified beneficiary of your current health plan
3. You must have a qualifying event

Current Health Plan Subject to the COBRA Law   

If your current plan is offered as a group plan through a private sector employer with at least 20 full-time employees, you will have COBRA continuation coverage. In many states, there are continuation laws or mini-COBRA coverage that allows smaller businesses to provide coverage. It's important to note that there are some exceptions for COBRA coverage; If your employer goes bankrupt and can no longer pay for the health plan or if you have a health plan that is offered by the federal government, churches, or church-related organizations. 

Qualified Beneficiary  

To be considered a qualified beneficiary, you need to be insured by the health plan at least one day before a qualifying event takes place. Additionally, you must be one of the following: 

• An employee of the employer sponsoring the health plan
• A spouse or ex-spouse of that employee
• A dependent of that employee
• An agent or independent contractor that isn’t officially an employee but participates in the health plan
• Eligible retired employees or retiree’s spouse and dependent child.

Qualifying Event(s)  

Qualifying events depend on whether or not you are an employee losing coverage or a spouse, or dependent on the employee. Your life event will qualify you for COBRA coverage if you are the employee and: 

• You’re laid off 
• You quit
• You’re fired, but not for gross misconduct like stealing or assaulting another employee or boss
• Your employment is terminated for any other reason
• You are still employed, but your hours are reduced below the full-time number that qualifies you for insurance

If you're a spouse or dependent of the employee, qualifying life events include:  

• One of the above things happened to the employee
• The employee becomes eligible for Medicare
• The employee died
• You are getting divorced or legally separated from the employee

If you're still unsure if you qualify, COBRAinsurance.com provides an eligibility survey that can help you determine if you qualify for coverage. 

How to Calculate Your Premium and Cost   

If you are considering leaving your job or want to learn more about your health plan benefits and coverage, your human resources (HR) can tell you how much your COBRA premiums will be if you want to continue coverage. However, if you want to determine your premium without altering your employer, you can ask HR how much your employer is contributing to monthly coverage and then look at your pay stub to find out how much you're contributing each month. Once you add those two numbers together, add in 2% more for the survival fee to determine exactly how much plan continuation will cost.  

Below is an example of the calculation: 

1. Your contributions: $125 per paycheck X 2 ( paid twice a month) = $250 per month
2. Employer’s contributions: $400 per month
3. Totalt contributions ( employer + employee) = $650 per month
4. Service charge: $650 x 2% = $13 per month
5. COBRA Premium: $650 +$13 = $663 per month  

It is important to note that the total amount above is only reflective of COBRA coverage for one person (the employee). Therefore if you are looking for coverage for spouse and dependents, $663 would be multiplied by the number of additional family members you are covering. 

Alternatives to COBRA    

COBRA is an expensive healthcare option, especially if you lost your job or decided to leave your current company and don't yet have another job lined up. Fortunately, there are alternatives to get coverage for you and your family. 

Individual MarketPlace Health Insurance 

With the Affordable Care Act (ACA) anyone, regardless of preexisting conditions, can access the health marketplace and gain individual insurance coverage. Plans are available for purchase during the annual open enrollment period, from November 1 to January 15. If you have a qualifying life event or QLE, you can qualify for a special enrollment period and marketplace options that fit your needs. Additionally, low to middle-income individuals and families can qualify for additional subsidies to reduce the cost of the plans. There are multiple QLEs that allow you to have a special enrollment period in the marketplace: 

• Loss of existing health insurance
• Change in your household due to marriage, birth, or adoption
• Move to a new area where different health plans are available
• Change in household income
• Other qualifying events, like obtaining us citizenship, or released from federal prison

Although marketplace plans are cheaper than COBRA coverage, you also have to take into consideration the different levels of plans, deductible costs, and how the geographic region that you live in affects your monthly cost. For example, a plan in New Hampshire could be $309, while the same plan could cost you $762 in Wyoming. There are three marketplace tiers, bronze, silver, and gold, that vary in cost and coverage options. 

Below is a chart illustrating the lowest cost option for each tier, in each state

      Source: Kaiser Family Foundation

Subscription-based Insurance Coverage 

If COBRA or marketplace plans do not fit your needs or budget, subscription-based healthcare might be a great alternative. With subscription-based care, patients will pay a flat installment fee based on a fixed amount (monthly, quarterly, and annually) which can include services like doctors and urgent care visits, and lab work. Mira is one of the top choices on the market, offering lower costs without compromising patient benefits. For only $45 a month, Mira subscribers get access to urgent care visits, telebehvaioral health, low-cost prescitoiosn, and lab visits. Additionally, with Mira, you are not confined to having care for a limited amount of time; your subscription and coverage will continue as long as you would like. 

Bottom Line  

Healthcare is non-negotiationable, and while some individuals can go without coverage, you want to be prepared whenever there are health emergency strikes. Especially if you are in between jobs, having some sort of health insurance coverage can save you thousands of dollars if you or someone in your family becomes ill. With COBRA insurance coverage, you have peace of mind that your plan and benefits will not change once you leave your current employer, but after a few months, it can be extremely difficult to maintain payment on such a high-cost plan. Additionally, even marketplace plans can become expensive depending on your location and the type of plan you or your family need. Nevertheless, if you are looking to reduce costs without sacrificing the quality of care, Mira might be the perfect option. For as low as $45 a month, you get the care you need without breaking the bank. Sign up Today! 

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