{"id":128228,"date":"2023-05-11T16:36:38","date_gmt":"2023-05-11T16:36:38","guid":{"rendered":"https:\/\/businessyield.com\/?p=128228"},"modified":"2023-05-12T10:59:50","modified_gmt":"2023-05-12T10:59:50","slug":"cobra-insurance-cost","status":"publish","type":"post","link":"https:\/\/businessyield.com\/insurance\/cobra-insurance-cost\/","title":{"rendered":"HOW MUCH DOES COBRA INSURANCE COST: All You Need To Know","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"

COBRA is a statute that permits people in certain conditions, such as divorce, job loss, and Medicare eligibility, to keep their health insurance coverage. COBRA, or the Consolidated Omnibus Budget Reconciliation Act of 1985, gives employees and their families who lose their health benefits the option to retain coverage for a limited period under specific conditions. The average monthly COBRA insurance premium cost is $417 for an individual plan and $1,564 for a family plan.<\/p>

How Much Does Cobra Insurance Cost?<\/h2>

The monthly COBRA insurance costs are determined by the cost of a certain health insurance plan.
According to the Kaiser Family Foundation, the average yearly premium for employer-sponsored health insurance family coverage in 2020 will be more than $21,000. Employees spent an average of $5,600 for health insurance. Without an employer taking up the slack, those same employees would have to pay an average of more than $21,000, plus an administration cost of up to 2%. That’s about four times the cost of the equivalent employer-sponsored plan.<\/p>

However, there are options available to you. COBRA coverage can be paid for with money saved in a Health Savings Account (HSA). HSAs, which are linked to high-deductible health plans, allow you to save tax-free for future healthcare bills such as COBRA.<\/p>

Federal income tax credits may also be beneficial. The United States Department of Labor provides a Health Coverage Tax Credit (HCTC) to those who lose their work as a result of the “negative effects of global trade.”<\/p>

The HCTC program of the United States Department of Labor covers 72.5% of premiums. If you qualify, the HCTC may assist you in making your COBRA premiums comparable to what you were paying when you were employed.<\/p>

How Do COBRA Premiums Work<\/h2>

The majority of employers pay the majority of their employees’ health plan premiums, with the remainder deducted from your salary. Workers contribute 20% of the cost for individual coverage and 30% for family coverage on average. However, under COBRA, you are responsible for the entire premium.<\/p>

Despite the fact that these expenditures are more than what you were previously paying, COBRA premiums are normally lower than what you’d pay on the open market because your plan still qualifies for the group discount.<\/p>

If COBRA is not in your budget, you will be able to switch to a less expensive plan during the next open enrollment period. High-deductible health plans (HDHP) have significantly cheaper premiums than other types of plans for both single and family coverage.<\/p>

Important Factors Factors Affecting COBRA Insurance Cost<\/h2>

#1. Health Plan Type<\/h3>

The cost of COBRA insurance is influenced by the type of group coverage you had from your job. A family plan typically costs much more than an individual plan.
Furthermore, the cost is determined by your provider’s network. For example, if you have an HMO plan, it will be cheaper than a PPO plan.<\/p>

#2. Level of Coverage<\/h3>

If your corporate health insurance plan covers the majority of out-of-pocket payments and has a low deductible, it will cost more than a plan with a higher deductible. A high-deductible health plan (HDHP), on the other hand, charges a reduced premium: approximately $200 less per month for a family plan vs a PPO in 2022.4 (It should be noted that the HDHP is still a highly costly plan with COBRA, costing an average of $21,136 for family coverage in 2022.)<\/p>

One method for lowering your COBRA insurance costs per month is to determine whether your business offers other lower-cost plan options with reduced coverage levels. If you’re in good health, this tradeoff can make sense.<\/p>

You cannot change your plans quickly after losing your work. You can, however, change your COBRA plan during your previous employer’s next open enrollment period (even if you no longer work for that company).<\/p>

#3. Contributions from Employers<\/h3>

Employers are not required to fund any of your COBRA premiums, but some do. Inquire with your human resources department to see if your firm covers a portion of COBRA and, if so, how much.<\/p>

#4. Geographical Area<\/h3>

Health insurance costs vary greatly based on where you reside. Individual coverage on a workplace plan cost an average of $6,340 per year in Arkansas and $9,037 per year in Alaska in 2021.COBRA premiums will be higher in five states with higher health insurance costs.<\/p>

#5. Taxes<\/h3>

Premium payments collected from your paycheck are typically pre-tax payments\u2014what you pay toward your premiums is not considered income until you file your taxes. COBRA premiums must be paid with after-tax dollars. As a result, your tax burden may rise because the money you use to pay your premiums is now considered income.<\/p>

There is a deduction for health insurance payments paid outside of work, but it is not available to everyone. You can deduct only healthcare expenses that exceed 7.5% of your adjusted gross income (AGI), and you must itemize your deductions. You cannot deduct COBRA premiums if you do not itemize or if your eligible healthcare expenses do not exceed 7.5% of your AGI.<\/p>

Furthermore, you will profit the most from the deduction if you have very high healthcare costs. For example, if your AGI is $100,000 and your healthcare costs are $8,000, you can deduct only $500.<\/p>

How to Work Out Your COBRA Premium<\/h2>

If you leave your present employment and opt to keep your COBRA coverage, the human resources (HR) department can assist you in determining your rates.<\/p>

If you prefer not to discuss your leave with your employer, you can calculate the cost of COBRA premiums on your own. You may find out how much your employer contributes to your monthly health insurance coverage by asking the human resources department. You can also establish how much you contribute by checking at your pay stub. Add those two values together, plus 2% for the service fee, to get the total amount you can expect to spend once you leave the company.<\/p>

Assume that you have $125 deducted from each paycheck for health insurance. You are paid twice per month, therefore your monthly premiums are $250. If your company provides $400 per month, your job-based plan will cost $650 per month.
To compute your total monthly COBRA premium, multiply $650 by 2%, for a total of $663 per month.<\/p>

Sample Calculation<\/h3>

Following is a sample calculation of how to calculate your COBRA payment after leaving your company.
Your contribution: $150 per paycheck multiplied by two equals $300 per month.
Contribution from your employer: $450 per month
Contribution total: $300 + $450 = $750 per month
$750 x 2% (or 0.02) = $15 per month service fee
COBRA premium: $750 + $15 per month = $663<\/p>

What is COBRA insurance?<\/h2>

COBRA lets workers and families keep their healthcare benefits for a limited period through times of transition, job loss, and other events. Depending on the cause of the loss of healthcare coverage, the time per period of this extended coverage varies. During this time, you must pay the premium that your employer originally paid for you.
Employers must generally provide COBRA coverage if they\u2026<\/p>