What does COBRA coverage cost?

Unfortunately, an employer does not pay for any part of COBRA premiums. Therefore, a beneficiary must pay the full amount of the group insurance’s monthly premiums plus an administrative fee of up to two percent. Cost can be a major deterrent to taking advantage of COBRA, since many privately held health policies cost less than group health policies.

The main reason for paying the high premiums is that some people have “pre-existing conditions”-medical problems that existed before buying a policy. Many insurers will not cover them, or will exclude the condition from coverage. Therefore, paying the premiums for COBRA coverage may be the only way that a beneficiary can continue certain needed health care when a qualifying event happens. The Health Insurance Portability and Accountability Act (HIPAA) guarantees that people who have continuous health coverage can’t be denied insurance even if they have pre-existing conditions. Therefore, using COBRA at least long enough to get other insurance would ensure HIPAA protection. If a beneficiary’s coverage lapses completely, causing a gap in insurance, he or she would completely lose the benefits of HIPAA.

The first COBRA payment may be a big one, because it covers the entire period retroactive to the qualifying event. Under the notification scheme, this could easily be seventy-five days, or even more, plus the next month’s coverage-at least three months of premiums all at once! A beneficiary must also keep payment dates in mind, since neither the employer nor the insurer must send premium notices.

Qualified beneficiaries must be offered coverage identical to that available to similarly situated beneficiaries who are not receiving COBRA coverage under the plan (generally, the same coverage that the qualified beneficiary had immediately before qualifying for continuation coverage). A change in the benefits under the plan for the active employees will also apply to qualified beneficiaries. Qualified beneficiaries must be allowed to make the same choices given to non-COBRA beneficiaries under the plan, such as during periods of open enrollment by the plan.