April 13, 2014

How Much Will COBRA Cost You?

When you leave an employer you have the right to continue coverage under their health insurance by paying for COBRA.    If you leave your employer voluntarily or involuntarily for anything but 'gross misconduct' then you generally qualify for COBRA.    For more specifics on how COBRA works see the Dept. of Labors FAQ on COBRA.    COBRA premiums can be expensive and people often don't know how much it will cost until they're attempting to sign up. 

How do you find out how much COBRA costs?

I can think if 3 ways to find out how much COBRA costs.

1. First you can simply ask your employer.   They should be able to tell you.    Your HR department or whoever handles such things should know the premium costs.   I'm assuming here but I don't see any reason why they would not know.     My employer actually publishes COBRA rates internally and its possible yours does too, especially if you work for a large company like I do.   Simply asking your employer is the obvious answer but people may not think of it or they may have a reason for not wanting to ask.  For example if you're thinking of leaving your current job for another job you may want to keep that quiet for now.

2. COBRA cost is generally 102% of the actual cost of health insurance.   That includes both the employee and employer contributions.   If you happen to know the total cost of your health insurance then 102% of that that is how much COBRA will cost as well.  

3. Figure the cost based on W2 information and your premiums.   Lastly one trick for figuring COBRA cost is to find the employer cost of health insurance on your W2 form.   Now the government requires most employers to document the cost of health insurance on the W2 forms.   For information on that see the IRS page on reporting of health insurance on W2's.    Box 12 DD of the W2 will list the employer contribution.    This doesn't count the amount that you as the employee pays and it does not include any HSA contributions.   You can figure the total cost of your insurance by adding the amount from box 12DD on the W2 plus your current monthly premiums.   So for example say you have a family of 4 and your current premiums are $200.   On box 12 DD of your 2013 W2 it lists a cost of $9600.   Your annual cost is $200 x 12 months for the employee contribution plus the $9600 for a total of $12,000 or $1000 a month.   Your COBRA premiums are likely to be 102% of that or $1020.


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