How Much Does COBRA Insurance Cost?

Last Updated on February 9, 2025
Written by CPA Alec Pow | Content Reviewed by CFA Alexander Popinker

Losing your job or health insurance can be stressful enough without having to immediately figure out new coverage. To ease these transitions, the federal COBRA law allows eligible employees to continue their existing group health plan for a limited time. But how much does COBRA actually cost compared to other insurance options?

In this guide, we’ll go over COBRA insurance pricing, who qualifies for coverage, what’s included, payment timeframes, and smart strategies to reduce costs. Read on for a comprehensive overview of what to expect when it comes to COBRA costs, requirements, and decisions.

How Much Does COBRA Insurance Cost?

Monthly premiums for COBRA continuation coverage typically cost from $400 to $700 per month for individual plans and $1,200 to $2,000 per month for family coverage, depending on the type of insurance plan, employer’s previous contributions, number of dependents, and regional healthcare costs. However, enrollees pay the full, unsubsidized group rate plus a 2% administrative fee under COBRA.

Actual COBRA premiums vary substantially based on multiple factors, but average monthly costs range from:

• $400 – $700 for individual COBRA coverage
• $1,200 – $2,000 for family COBRA coverage

Some of the key variables impacting COBRA insurance pricing include:

Type of Insurance Plan

• PPO plans generally cost more than HMOs.
• Low-deductible, low co-pay plans have higher premiums than high-deductible choices.

Employer’s Previous Contribution

• The lower the employer subsidy was pre-COBRA, the higher your self-paid premium cost will be.

Regional Variations in Healthcare Costs

• Premiums are higher in areas of the country with greater care expenses.

Number of Dependents Covered

• More enrolled family members means higher total premiums.
• Self-only coverage is cheapest.

Let’s examine some example scenarios to demonstrate how these factors influence COBRA costs:

Example 1) Good Employer Plan in Low-Cost Area

• Previous Monthly Premium: $350
• Employer Portion: $300 (86%)
• Employee Portion: $50
• COBRA Cost: $350 + 2% admin fee = $357/month

Example 2) High Deductible Plan in Expensive Area

• Previous Monthly Premium: $1,000
• Employer Portion: $200 (20%)
• Employee Portion: $800
• COBRA Cost: $1,000 + 2% = $1,020/month

Example 3) PPO Family Plan

• Previous Monthly Premium: $1,800
• Employer Portion: $1,000 (56%)
• Employee Portion: $800
• COBRA Cost: $1,800 + 2% = $1,836/month

As you can see, COBRA costs rise drastically without the previous employer subsidies.

According to a report from Cobra Insurance, the average monthly cost for individual COBRA coverage ranges from approximately $400 to $700 per person. This range reflects both state-specific pricing and overall market conditions.

Another source, Investopedia, notes that while employees typically pay around $145 per month for an individual plan during employment, this amount can increase substantially under COBRA since they must cover the entire premium previously shared with their employer. For instance, if an employer-sponsored plan costs about $703 per month, including both employee and employer contributions, switching to COBRA could result in a monthly payment close to this full amount plus a 2% administrative fee.

A detailed overview from various sources indicates that family coverage under COBRA can be even more expensive. For example, family plans might cost between $1,500 and $2,000 per month, depending on factors like location and specific health needs (Reddit HealthInsurance Community). Additionally, some states have higher average premiums; Wyoming’s average is around $700 per person for individual coverage (Cobra Insurance Premiums Explained).

What is COBRA Insurance?

First, a quick primer on COBRA itself:

• COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, passed in 1985.
• It requires employers with 20+ workers to allow certain individuals to continue group health benefits for 18-36 months after losing eligibility.
• Enrollees pay 100% of the plan premium themselves, plus a 2% administrative fee.
• This permits uninterrupted care from the same providers and network even without an active job.

By electing COBRA, employees, spouses, and dependent children can maintain workplace health insurance during major life changes and transitions.

Who Qualifies for COBRA Coverage?

These individuals are eligible for COBRA continuation coverage if they lose employer health benefits:

• Employees who quit, were laid off, or terminated (excluding gross misconduct)
• Former spouses and dependents of covered employees
• Spouses and children who age off parent’s health insurance
• Anyone who loses coverage due to reduced work hours

Essentially, COBRA protects anyone losing workplace health insurance through no fault of their own – excluding those fired for cause – provided the company has 20+ workers.

How Are COBRA Insurance Premiums Calculated?

COBRA enrollees must pay the full group plan premium themselves, rather than just their previous employee contribution.

This includes the portions previously covered by the employer, plus a 2% administrative fee.

You might also like our articles on the cost of Malpractice insurance, health insurance in general, or Medicare.

For example:

• Monthly premium: $1,000
• Employer previously paid: $800
• Employee paid: $200
• Under COBRA, the employee now pays the full $1,000 + 2% administrative fee ($20) = $1,020 monthly

This often represents a major cost hike, since the employer subsidy disappeared. Employees with family plans see the highest increases.

How Long Does COBRA Coverage Last?

Standard COBRA continuation coverage lasts 18 months from the date employee insurance ends.

Certain qualifying events allow extensions:

• Disability – Coverage may continue an extra 11 months (total 29 months)
• Divorced/widowed spouses or aging-out dependents – 36 months from date of event

Either way, COBRA coverage is not permanent and eventually expires and requires finding a new insurance plan.

COBRA Insurance Payment Rules

It’s vital to closely follow COBRA’s premium payment guidelines to maintain coverage:

• Enrollees must remit the first payment within 45 days of electing COBRA.
• The initial payment must cover all premiums back to the date regular coverage ended.
• Subsequent monthly premium payments are due the 1st of each month to continue benefits.
• Failing to pay on time can result in termination of coverage with no ability to reenroll.
• Late payments may qualify for a 30-day grace period if an insurer chooses to provide one.
• Payments cannot be made in installments – the full monthly premium must be paid.

Carefully following the payment timelines helps ensure you receive uninterrupted COBRA benefits.

COBRA vs. Other Health Insurance Options

While continuing current coverage seems appealing, is COBRA worth those premium costs compared to alternatives like ACA plans or short-term insurance? Let’s compare the pros and cons.

COBRA vs. ACA Marketplace Plans

• Cost: COBRA enrollees pay full premiums, while ACA provides subsidies to reduce costs for many.
• Provider Access: COBRA maintains existing network while ACA plans vary.
• Continuity: COBRA better continues ongoing treatments and coverage of pre-existing conditions.
• Flexibility: ACA plans allow changing options annually unlike locked-in COBRA.

COBRA vs. Short-Term Insurance

• Cost: Short-term plans are cheaper but limited to 3-12 months.
• Coverage: Short-term insurance may exclude pre-existing conditions or certain services.
• Provider Access: COBRA maintains existing provider network.

COBRA vs. Medicare and Medicaid

• Medicaid provides low/no cost coverage for those meeting income thresholds.
• Medicare is an option at age 65+ once COBRA expires.

Strategies to Reduce Costs

While often expensive, there are some ways to lower COBRA insurance costs in certain situations:

• Employer Subsidies – Some firms partially cover COBRA costs for a period after mass layoffs.
• Government Assistance – Programs like ARPA previously provided COBRA subsidies during special circumstances.
• Switch to Cheaper ACA Plan – Weigh marketplace options in case subsidies make them more affordable.
• Spousal or Parent Insurance – Individuals under 26 can join a parent’s plan. Spouses can switch too.
• Change Coverage Level – Electing self-only rather than family coverage lowers costs.
• Move Locations – Relocating to lower-cost regions can reduce premiums.

While not guaranteed, exploring these avenues may help reduce COBRA costs for those who need continued care.

Step-By-Step Guide to Enrolling

If electing COBRA coverage, follow this process closely:

1. Receive COBRA Notice

Employers must send the election notice within 14 days of losing coverage. Review it closely.

2. Elect COBRA Within 60 Days

To continue benefits, complete and return the COBRA election form to the plan administrator within 60 days.

3. Make First Payment Within 45 Days

Once elected, make the initial COBRA premium payment before the 45-day cutoff to activate coverage.

Missing enrollment deadlines can jeopardize COBRA eligibility, so act promptly.

Should You Choose COBRA Insurance?

• Best for those needing continuity of care like individuals mid-treatment or waiting for new employer benefits.
• Consider alternatives like ACA plans or Medicaid if COBRA premiums exceed budget.
• Compare coverage and run the numbers before declining COBRA. It may beat alternatives.
• See if a spouse’s plan is available as an alternative in married couples.

Carefully weighing the costs against benefits for your situation leads to smart insurance decisions.

Expert Insights

We spoke with human resources and healthcare policy experts to address some of the most common COBRA issues.

“COBRA helps in the near term but isn’t a permanent solution. Have a game plan for re-enrolling in employer benefits or finding other insurance before that 18 months runs out.” – Alicia Thompson, HR Director, Peterson & Associates

“The American Rescue Plan provided temporary COBRA subsidies during COVID-19. Unfortunately those enhancements expired, otherwise COBRA could be very affordable right now.” – Jensen Wu, Health Policy Analyst, Center for American Progress

“Don’t assume COBRA is your only option if you lost insurance. In many cases, an ACA marketplace plan provides equal or better benefits for lower out-of-pocket costs, especially with subsidies.” – Dr. Rashmi Shetty, Former Insurance Commissioner

Final Words

While often expensive, COBRA insurance allows continued healthcare coverage at a critical time. Those needing uninterrupted care may find COBRA worthwhile if affordable. But comparing marketplace plans can reveal lower cost options too. With this guide’s advice, you can make informed choices about your COBRA and health insurance options.

Answers to Common Questions

Is there a cheaper alternative to COBRA?

In many cases, yes – marketplace health plans purchased through Healthcare.gov are a cheaper alternative, especially if you qualify for ACA subsidies to reduce premiums. Medicaid is another option for lower-income individuals. Even short-term insurance plans are less expensive for basic coverage, though benefits are limited.

When did COBRA start?

COBRA was enacted in 1985 under the Consolidated Omnibus Budget Reconciliation Act. It became effective for most employer health plans beginning on January 1, 1987. Some collectively bargained and church plans were given until 1989 to implement COBRA continuation coverage. 2022 marked COBRA’s 35th anniversary as federal law.

What happens after Cobra?

Once your 18-36 months of COBRA expires, some common options include: enrolling in a marketplace ACA plan, joining a spouse’s employer health insurance, choosing a short-term insurance plan, applying for Medicaid if eligible, or joining Medicare if aged 65+. Losing COBRA makes you eligible for a 60-day ACA special enrollment period. Planning ahead is key to avoid any gaps without coverage.