I first wrote on this topic two years ago and decided to revisit as the numbers keep marching upward.
Whenever the topic of COBRA comes up, the immediate response is always: “COBRA is expensive!”
That’s true – COBRA is expensive, because health insurance is expensive!*
What is COBRA? The acronym comes from the Consolidated Omnibus Budget Reconciliation Act.
COBRA gives employees the right to continue their employer-sponsored group health insurance when they leave their jobs. Generally employers with 20 or more employees must offer this continuation, usually for 18 months.
Between 153-180 million people in the US (a little more than half the population) are covered by group health insurance through their employer.
In most cases, the employee pays a portion of the premium (often 15%-30%) with before tax deductions from their paycheck. The employer pays the remaining 70%-85%.
If you go on COBRA, you usually pay the entire cost of the premium. The former employer is allowed to charge 102% of the actual cost.
So instead of paying 15-30% via paycheck deduction that you might not notice, your cost jumps dramatically to the actual cost of insurance + 2% surcharge, paid out-of-pocket.
So, how much money are we talking about? What is the actual cost of your group health insurance coverage?
There’s an easy way to find out.
For most employees, it’s reported on your W-2 form.
Take a look at your W-2 form, Box 12, Code DD: This number is the total yearly cost of coverage for your group health plan, both the employee and employer contributions.
Let’s take a look at a few of the code DD’s I’ve seen this year:
Over 27K for family coverage:
Two years ago this client’s cost was $24,506. It’s gone up over 12% in 2 years.
Almost 10K for single coverage:
Two years ago this client’s cost was $8,928. It’s gone up 10% in 2 years.
Lastly, the highest one I’ve seen so far this year, at a large Boston hospital:
Nearly 51K+ for family coverage!
Two years ago this client’s cost was $38,251. It’s gone up 33% in 2 years!
Two years ago this client’s cost was $38,251. It’s gone up 33% in 2 years!
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So yes, it’s true that COBRA is expensive…. because your insurance is expensive.
Note: This W-2 reporting is for informational purposes only, the amount is not taxable. According to the IRS, it’s to show employees the value of their health care benefits and to give them “useful and comparable consumer information on the cost of their health care coverage.”
*There certainly may be less expensive options available, such as the MA Health Connector. Depending on your income, you may qualify for a Premium Tax Credit.
