The cost of COBRA will depend on the state you live in and the type of health plan your former employer offered.
When working, your employer will generally pay some portion of your health coverage cost as part of your “benefits package.” Effectively, the company subsidizes a portion of the health insurance premium. The amount that a company will contribute depends on the type of health coverage offered, but averages around 75% of the premium, with the remainder of the cost coming out of your paycheck.
As a large organization, your employer gets a volume discount when purchasing what is referred to as group insurance. In many cases, this group insurance is cheaper than what it would cost you to purchase health insurance on your own.
Under COBRA, you benefit from being able to continue on the group insurance plan at the group rate, but you are required to fund 100% of this cost, plus 2% for administrative fees. According to the Kaiser Family Foundation and the Health Research & Educational Trust, in 2008 the average annual premium for employer sponsored health plans was $4,707 (or $392 per month) for individuals and $12,680 (or $1,057 per month) for families.
With the passage of the American Recovery and Reinvestment Act in February 2009, there is now a subsidy that offsets 65% of the cost of COBRA insurance premiums. To learn more, see our article about qualifying for the COBRA subsidy.
In addition to the COBRA subsidy, some companies may subsidize a portion of your COBRA costs as part of your separation agreement. If you are already out of work and paying for COBRA, contact the human resources person at your former employer to see if they have made any changes to the policies.
COBRA is retroactive. If you choose not to sign up for the COBRA at the time of your departure, you still have a 60 day window to enroll. If you allow time to pass between the date of your departure and the time you make the decision to sign up for COBRA, you will have to pay for the time period that has elapsed, but you will also be covered by the insurance for medical costs incurred over this time.