If you get your health insurance through your job, you probably get a certain amount of money deducted from each of your paychecks to be applied toward the coverage. However, the amount deducted is not necessarily how much your insurance coverage actually costs. Your employer may be subsidizing the cost of your insurance, so that you only have a portion of the actual insurance premium deducted from your check. Your employer pays the rest to the insurance company each month.
When you leave your job, your employer may be required by law to give you an opportunity to remain on the employer's plan for 18-36 months, depending on your situation. This is called COBRA continuation coverage, and it is a continuation of the exact same benefits you received as an employee. However, your employer is under no obligation to pay any part of COBRA.
Let's say, for example, that you get $300 per month deducted from your paychecks for health coverage. However, the actual cost of your health coverage is $600 per month. Thus, your employer has been paying the insurance company $300 per month on your behalf.
When you leave your job, you receive a notice stating that if you choose to elect COBRA, your premium will be $612 per month. This may come as a big surprise to you, since you have grown accustomed to paying just $300 per month for your insurance coverage. But the plan is not charging you extra for COBRA coverage - it is merely charging you the full premium, plus a 2% administrative fee permitted under the law.
Some health policy experts believe that COBRA is flawed because it forces many people to pay their full, unsubsidized health insurance premium at a time when they no longer have any income. Furthermore, it seems like an unfair surprise to plan enrollees who are not aware of just how much their employer is paying the plan on their behalf. If you are thinking about leaving your job and electing COBRA coverage, you may be able to find out how much it will cost by contacting your Human Resources department.
