Who Really Pays for COBRA?

If you’ve ever lost a job, quit a job, or changed jobs, you know how important it can be to figure out your next step with health insurance. Going without health insurance is never a good idea, because medical bills could leave you deeply in debt and needing debt relief. 

COBRA insurance gives people a way to keep their old job’s health insurance after getting laid off or quitting. But once you understand who really pays for COBRA, you might want to choose another form of health insurance. 

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is the law that created COBRA insurance. This law gives Americans the right to keep using the same health insurance that they had from their former employer. COBRA can be a good choice for some people and certain situations. But a lot of people have misunderstandings about just how expensive COBRA insurance can be, and who really pays for COBRA. 

Here’s the thing about COBRA: Your (now former) employer doesn’t pay for it, and the government doesn’t pay for it. COBRA is not a government health insurance program like Medicare or Medicaid. 

The answer to “who really pays for COBRA” is: you.

Let’s take a closer look at the full costs of COBRA and what other choices you might have for health insurance after losing a job (or leaving a job).  

How COBRA Works

If you receive health insurance through your employer, you might not realize just how much your health insurance plan really costs. Many employers help pay for some of the costs of your health insurance premiums. And even though your employee portion of the monthly premiums gets deducted from your paycheck, it can be a somewhat veiled cost. 

Your health insurance company doesn’t make you write them a check every month. The costs are often shared between you and your employer, and you might never be aware of the employer’s part. For example, if your employer covers half of the premium costs and your monthly premium is $1,000, you might only notice $250 getting deducted from each of your twice-a-month paychecks—but the actual cost of that health insurance premium is $1,000.

If you leave your job, lose your job, or your hours get reduced to the point where you’re no longer eligible for benefits, you may suddenly have to find new health insurance coverage. COBRA insurance is one option for continuing your health insurance plan. But the costs might shock you. 

Once you enroll in COBRA, you pay 100% of the premium plus an additional 2% for administrative costs. In our example above, you’ll pay $1,020 per month.

Also, COBRA coverage doesn’t last forever. Depending on your situation, you may only be able to keep using COBRA insurance for 18 to 36 months.

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How Much Will COBRA Cost You?

The exact cost of your COBRA insurance will depend on your former employer, your age, the number of people on your health insurance plan, and the type of coverage you choose. Here’s an example of how much COBRA insurance might cost you: 

Let’s say you have family coverage from your employer. You pay the 2024 average total premium cost of $25,572 for your entire year. This means that every month, you and your employer are paying a combined $2,131 for your health insurance premiums. Let’s say that your employer pays 75% of that premium, or $1,598. That means every month while working at your job, you pay $533 for your family’s health insurance.

But then you lose your job. If you want to keep your family’s current health insurance plan by using COBRA, you must pay the entire $2,131 per month.

You decide to sign up for COBRA so you can continue to receive the same health coverage. Here’s what you’ll have to pay out-of-pocket.

• $2,131 per month (Your former employer’s premium contributions plus your own.)

• 2% service charge or $43 ($2,131 X .0.02=$43)

Your total cost for COBRA will be $2,174 per month, not the $533 per month you’ve paid in the past. That’s a big increase of $1,641 per month. And COBRA insurance can be especially hard to afford if you’re unemployed or earning less than you used to.

In a few situations and for some people, COBRA insurance could be the best choice. If you don’t want to interrupt treatment and you can afford to pay the premiums, COBRA could be preferable to finding the right new insurance policy on short notice. 

If you and your family have certain doctors or clinics that are in-network with your COBRA insurance plan, it might be worth paying the extra COBRA costs until you get back on your feet financially. But many Americans don’t have big savings accounts or extra income to pay for COBRA. Most people might want to look for alternatives. 

Alternatives to COBRA

Now that you know just how expensive COBRA insurance can be, you may be wondering whether there are any alternatives. The good news is yes, there are. If you’d like to avoid the high cost of COBRA, consider the following choices: 

• Get added to a family member’s health insurance plan. If your spouse is employed and has access to a job-sponsored health insurance plan, find out if you can be added. Losing job-based health insurance is considered a qualifying event, which lets you enroll in a new plan even if it’s outside the annual open enrollment period. Contact the plan administrator at your spouse’s workplace and then fill out the forms. If you’re a young adult under age 26, you might be able to get added to your parents’ health insurance. 

If you want to put yourself on a family member’s plan, you’ll have 60 days from the time your former employer stops paying for your coverage.

• Check out HealthCare.gov. If you aren't eligible for a family member’s plan, go to HealthCare.gov to look for options for health insurance. Based on your income and the state you live in, you might qualify for lower-cost or free health insurance premiums. 

If you lose a job or lose job-based health insurance, you can use HealthCare.gov any time of year, not just during open enrollment. 

• Find out if you qualify for Medicaid. Often, Medicaid is a cost-effective way to obtain health insurance coverage if you’re eligible. And Medicaid isn't just for the lowest-income people. In the past few years, some states have expanded Medicaid coverage to some higher-earning households.  Use HealthCare.gov to find out if you qualify for Medicaid. 

• Speak to an expert. The local help tool on Healthcare.gov can help you find an agent who is trained to provide free impartial and accurate information. They're certified by the Marketplace to help you apply and enroll in any Marketplace health plan, Medicaid, or help with the Children's Health Insurance Program (CHIP) coverage for your family.

Why You Shouldn’t Go Without Health Insurance

Medical debt is one of the biggest causes of bankruptcy in the U.S. A single accident or illness could forever change your life and zap whatever financial security you have. 

Since COBRA insurance is so expensive, you might be tempted to give up health insurance after losing a job. Don’t make this mistake. You still have options to get health insurance through HealthCare.gov or Medicaid. 

Even if your new health insurance plan is less generous than your former job-based plan, you can still go to the doctor, get prescriptions, and be protected from big hospital bills and medical debt. 

The Bigger Question Remains: Who Really Pays for COBRA?

The simple answer is that you pay for COBRA, all by yourself, as an individual person dealing directly with your insurance company. With COBRA, you no longer have the safety net of your employer chipping in money to cover the costs of your health insurance.

For most people, COBRA insurance has far more expensive premiums than the plans you could get on HealthCare.gov. But paying for COBRA can sometimes be the best choice, if it lets you keep seeing your current doctors or if it protects you from higher deductibles. Compare numbers between your COBRA insurance and your choices from HealthCare.gov and see which is the best for your budget.