How Much Does COBRA Cost?
Along with mortgage crisis and stimulus package, COBRA is another topic that shot to popularity in the wake of the recent recession. People who used to be employed but who lost their job at the height of the financial crisis know what COBRA means. COBRA relates to a situation where an employee extends the health insurance coverage provided by his employer as part of his compensation package, after he loses his job. COBRA takes effect when the employee assumes the obligation of paying the health insurance premiums.
Many employees end up shocked to find out that extending their health insurance coverage costs more than the premiums they used to pay when they were still employed. How much does COBRA cost? The actual cost may vary depending on your coverage. But one thing that is sure is that employees shouldn’t expect it to be as much as or anywhere near the premiums that employers previously deducted from their salaries. This is because the previous premiums that employers deduct are not exactly the value of the insurance as part of it is subsidized by employers. As a result, what employees pay is only a part of the total premiums due.
After discharging an employee, an employer is required to retain the discharged employee in the company’s insurance coverage anywhere between 18 to 36 months, depending on state law. Within this period, the discharged employee is entitled to the same benefits that he used to enjoy under the said plan. Unfortunately, while the employer is required to keep the employee covered, he is not required to shoulder the cost of the premiums. Thus, the employee almost always ends up paying the entire cost of the premium, without the employer subsidy.
Many employees get turned off by the usual COBRA quote, thinking that the insurance company has unconscionably increased the amount of premiums. The truth is, the insurance company is only charging you the entire unpaid premium, plus a minimal usually of 2 percent to defray the documentary and administrative costs. For example, if you had been used to paying $400 as premium, how much does COBRA cost in this case? Expect to get quoted a COBRA cost of $800 at the most, plus $16 as processing fee.
This may sound like a bitter pill to swallow. In fact, many policy experts believe that it is never a sound policy to compel a person who just lost his employment to pay his health insurance premiums in full, and without the employer’s subsidy. Worse, in some cases, the employee is not even aware of exactly how much the health insurance coverage cost. As a result, it is almost impossible to be ready with enough funds to shoulder the COBRA cost in the event that the employee is suddenly discharged from his employment.
The key here is to never leave your job uninformed. If you are inclined to exit from your current employment, it might be wise to get in touch with your Human Resources person to find out the details of the health insurance plan.
Filed Under Costs, Health | Leave a Comment
Tagged With COBRA Cost, COBRA Prices, Cost of COBRA, How Much Does COBRA Cost, What Does COBRA Cost
Comments
Leave a Reply