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How to Calculate Your Monthly COBRA Insurance Cost

Find out what your exactly monthly COBRA premium will be.

How to Calculate Your Monthly COBRA Insurance Cost

When you are deciding whether or not COBRA insurance is the right option for you and your family, the first thing many people want to know is the cost of COBRA insurance coverage monthly. Knowing exactly what your monthly premium will be can help you decide whether or not it makes sense financially to elect COBRA insurance. Calculating your monthly COBRA insurance premium is easier than most people think and can be done in just a few minutes. As part of any decision to consider COBRA insurance, it is always important to get insurance quotes for other insurance options so you can find the most affordable option. These quotes are free and instant and will provide good alternative options.

Understanding Your Options: Calculating COBRA Insurance Cost and Alternatives

Many people mistakenly believe that when they lose, quit, or retire from their job, COBRA insurance is the only option they have other than being uninsured. However what many people don't recognize is that there are actually many options beyond COBRA insurance and the first step to making a smart financial and healthcare decision for your family is understanding how to calculate your monthly COBRA insurance cost and then comparing that against options.

COBRA Insurance Cost vs. Alternatives

Step 1:

Calculating the Cost of COBRA Insurance, Average Cost: $1084 monthly

The first step to calculate your monthly COBRA insurance cost is to determine how much your monthly premium was with your former employer. The easiest place to find this information is on your last pay stub. Since many employers subsidize, or pay for, part of the group insurance costs, you are going to want to find out exactly how much you pay and how much your employer pays. This amount is listed on most pay stubs as Insurance Deductions. Once you have each number, you will want to add those together and that is your current monthly premium. For example, if your employer paid $700 and you paid $362 in insurance premiums, then your total monthly premium is $1062.

In addition under the federal COBRA insurance law, your monthly COBRA insurance cost will be the total that you calculated in step 1, your previous monthly premium, plus a 2% administration fee. To determine what this is, all you have to do is multiple your previous monthly premium by 102% (or 1.02) and you have successfully calculated your monthly COBRA insurance premium. In our previous example, we would multiple $1062 X 1.02 and get $1084. This is the amount it would cost every month to continue to receive health insurance under COBRA insurance law.

Step 2:

Explore COBRA Insurance Alternatives, Average Monthly Cost: $420

Now that you know how much your COBRA insurance cost is, now it is time to explore alternative options. The easiest way to do that is to get a free insurance quote. When you get a free quote, you will enter basic information about yourself (or family) and your current health status. From there you will be given a list of potential insurance plans ranging from comprehensive plans, just like what you had with your employer, to catastrophic and short term plans. On average families who choose a private insurance plan save 65%, or over $650 a month for the same level of coverage. Don't make the mistake of assuming no other insurance plan will cover what you COBRA does. In fact many private insurance plans cover just as much if not more than your plan with your prior employer.

Tips and Warnings

  • Prepare to pay a higher COBRA monthly premium when you make your first payment. Since when you sign up for COBRA insurance it covers you from the day that you lost group health insurance coverage, you will have to pay for the entire length of coverage up until the day of the first payment. That means that if you have been covered for 2 months, you will have to pay the premium for each month with your first payment.
  • There are many alternatives to COBRA insurance, many of which are substantially cheaper. It is wise to consider other options before determining that COBRA is the right option for you.

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