When seeking out health insurance coverage past when it’s partially covered by your previous employer, how do you choose between picking COBRA or private health insurance?
Both have pros and cons. The right choice, however, depends on your unique circumstances.
Let’s discuss the pros and cons of COBRA vs. private health insurance.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is not insurance itself. Alternatively, COBRA is a law that was passed in 1985.
This law, COBRA, allows employees to continue on their existing health insurance plan if:
Under COBRA, the employee continues on his or her insurance plan but is then responsible to cover the entire cost. It is no longer the employer’s responsibility to cover health insurance premiums as they had previously.
COBRA, however, is not available to everyone. COBRA is only available to employees who worked at a public or private company with 20 or more employees.
Private health insurance, on the other hand, is any health insurance policy plan that is not run by a government-run insurance plan (i.e. Medicare, Medicaid, Obamacare).
This type of coverage, though not government-run, must comply with state and federal insurance regulations.
Depending on the type of insurance policy, regulations include:
Lastly, you can use COBRA coverage for 18 to 36 months depending on why you need it. Plus, it can be extended depending on qualifying events.
A COBRA premium can cost on average $400 to $700 a month per person.
In order to calculate the cost of COBRA continuation coverage, add how much the employer contributes to the health plan, plus how much the employee contributes to the health plan, then multiply the sum by 2% for the service fee.
Please see the formula below:
(Employer contribution to coverage + Your Contribution) x 0.02% = COBRA Premium)
For example, an employer who contributes $400 a month for an employee who contributes $200 a month would bring the total to $600 towards contributions. Multiplied by the 2% charge, the COBRA cost each month would cost $612 each month.
Insurance premium costs are on the rise and show no sign of slowing down. As time goes on, the price of private health insurance is expected to continue increasing. Research found the national monthly average of insurance costs in 2022 sat at $541.
Both COBRA and private health insurance will help provide the security of having health insurance if you no longer have access to employee benefits. Weigh the pros and cons of each to see which policy fits your needs best.
Still have questions? Reach out to our expert team of brokers and visit our COBRA page to learn more.
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