Have you ever quit your job or, worse been laid off or fired, and then received a thick packet of paperwork probably from a company you’ve never heard of telling you about your rights to COBRA? What is COBRA? You probably quickly scanned the letter looking for the part where it said how much your insurance is going to cost to keep and were shocked at the prices and thought “Why is COBRA so expensive?!”
A little history lesson. In 1986, President Reagan signed into law the Consolidated Omnibus Budget Reconciliation Act of 1985. The purpose of the law was to guarantee that employees who lost their job could continue to receive health insurance benefits. The law only applies to group health plans in the private sector with more than 20 employees and state and local governments. That’s great that you can continue to receive your healthcare benefits when you are no longer working. But paying for it is another story.
One of the big drawbacks of COBRA is the cost. Not necessarily the cost of COBRA, but the cost of healthcare in general. While you were working, your employer was most likely contributing a percentage to your monthly premium. Usually at least half of the cost. If you had employee only coverage, it is possible that your employer paid 100% of the premium and you had $0 in payroll deductions. Consider yourself lucky while you are working, but once your employment ends your employer will no longer be paying a percentage of your healthcare, so now 102% of the cost is yours. There is a 2% administration fee for COBRA. About $500/month is average for employee only coverage. Going from $0-$500 is a big jump. If you had family coverage, you may have seen a $200 weekly payroll deduction. Approximately $800 per month. When your employer stops contributing you are left with a whopping $1,600/month bill. That is double what you had been used to paying!
Oftentimes, when you elect your insurance through your employer you only see the payroll deductions. That is almost never the full premium. Your employer is paying a portion, usually at least 50%, often more than 50%. I would encourage you to reach out to your HR department and find out what the full premium amount. You may be pleasantly surprised to find out how much your employer is paying for your healthcare each month. Give your HR professional a big thank you!
Jennifer Webster SHRM-CP | Account Manager, Silberman Group