COBRA Premium Calculator
Use this calculator to estimate your potential monthly COBRA health insurance premium. COBRA allows you to continue your health coverage after certain qualifying events, but you typically pay the full cost of the premium plus an administrative fee.
Estimated Monthly COBRA Premium:
Understanding COBRA: Your Guide to Continued Health Coverage
Losing your job or experiencing a reduction in work hours can be a stressful time, especially when it comes to maintaining health insurance coverage. This is where the Consolidated Omnibus Budget Reconciliation Act (COBRA) comes into play. COBRA is a federal law that allows certain individuals to continue their health benefits provided by their employer for a limited period after a qualifying event.
What is COBRA?
COBRA is a landmark federal law passed in 1985 that provides workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102% of the cost to the plan.
Who is Eligible for COBRA?
To be eligible for COBRA, you must meet several criteria:
- Your employer must be covered by COBRA: Generally, this applies to private-sector employers with 20 or more employees, and state and local government employers.
- You must be a "qualified beneficiary": This includes the employee, their spouse, and dependent children who were covered by the group health plan on the day before the qualifying event.
- You must experience a "qualifying event": Common qualifying events include:
- Termination of employment (for reasons other than gross misconduct)
- Reduction in hours of employment
- Death of the covered employee
- Divorce or legal separation from the covered employee
- A child ceasing to be a dependent under the plan's rules
- The covered employee becoming entitled to Medicare
How COBRA Costs Are Determined
One of the most significant aspects of COBRA is its cost. When you're employed, your employer typically pays a substantial portion of your health insurance premium. Under COBRA, you are responsible for the entire premium. This includes both the portion you previously paid as an employee and the portion your employer previously covered. Additionally, the plan can charge an administrative fee of up to 2% of the total premium.
The calculation is straightforward: COBRA Premium = (Full Monthly Premium) + (Up to 2% Administrative Fee).
For example, if your employer's total monthly cost for your health plan was $600, and they charge the maximum 2% administrative fee, your monthly COBRA premium would be $600 * (1 + 0.02) = $612.
Why COBRA is Often Expensive
The primary reason COBRA is expensive is the loss of the employer subsidy. While employed, you might only see a small deduction from your paycheck for health insurance, perhaps $100-$200. This is because your employer is covering the majority of the actual cost. When you elect COBRA, you take on that full financial responsibility, making the monthly premium seem significantly higher than what you were accustomed to paying.
Using the COBRA Premium Calculator
Our COBRA Premium Calculator helps you estimate your potential monthly cost. Here's how to use it:
- Current Monthly Health Insurance Premium (Employer + Employee Share): Enter the total monthly cost of your health insurance plan. This is the full amount your employer pays to the insurance company, not just your employee contribution. You can usually find this information on your benefits statement, from your HR department, or on your COBRA election notice.
- COBRA Administrative Fee Percentage: This is typically 2%. If your COBRA notice specifies a different percentage, enter that value. Otherwise, 2% is a common default.
- Click "Calculate COBRA Premium" to see your estimated monthly cost.
Alternatives to COBRA
Given the high cost, COBRA isn't always the best option. It's crucial to explore alternatives:
- Health Insurance Marketplace (Affordable Care Act – ACA): You may qualify for subsidies (tax credits) on the ACA marketplace, which can significantly reduce your monthly premiums. Losing job-based coverage is a qualifying life event that allows you to enroll outside of the annual open enrollment period.
- Spousal Coverage: If your spouse has health insurance through their employer, you might be able to join their plan. Losing your job-based coverage is often a qualifying event for this as well.
- Medicaid: If your income is low enough, you might qualify for Medicaid, which provides free or low-cost health coverage.
- Short-Term Health Insurance: These plans are generally less expensive but offer limited benefits, don't cover pre-existing conditions, and aren't ACA-compliant. They are typically meant as a temporary bridge.
Important Considerations
- Enrollment Period: You typically have 60 days from the date of your qualifying event or the date you receive your COBRA election notice (whichever is later) to elect COBRA coverage.
- Duration of Coverage: COBRA coverage is temporary, usually lasting 18 months for job loss or reduced hours, and up to 36 months for other qualifying events like divorce or loss of dependent status.
- Retroactive Coverage: If you elect COBRA, your coverage can be retroactive to the date of your qualifying event, meaning you'll be responsible for premiums for the months you were uninsured but covered by COBRA.
While COBRA provides a valuable safety net, it's essential to understand its costs and explore all available options to make the best decision for your health and financial well-being.