How Much is COBRA for a Family of 4?

Losing employer-sponsored health insurance can create a financial challenge for families, especially when they must turn to COBRA continuation coverage.

While COBRA allows a family to keep their existing health plan after job loss, the cost can be significantly higher than expected. For a family of four, this expense often exceeds $2,000 per month, which can add stress to an already difficult situation.

In this article, we will explore what COBRA is, how much it costs for a family of four, and other alternatives.

What is COBRA Insurance?

COBRA insurance provides temporary continuation of employer-sponsored health coverage when an individual or family loses access to their group health insurance. The law, established under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985, applies to private-sector employers with 20 or more employees and offers coverage for up to 18 to 36 months, depending on the qualifying event.

COBRA Coverage Basics

COBRA allows families to maintain their employer-sponsored health plan after losing coverage due to events like job termination or reduction in work hours.

It ensures that families can continue their existing health coverage even when they are no longer employed, but the cost is transferred fully to the individual.

Eligibility for COBRA

Families are eligible for COBRA if they experience qualifying events such as:

• Job loss
• Reduction in hours
• Divorce
• Child aging out of a parent's plan

These qualifying events trigger the right to continue coverage for 18 months, but this can be extended up to 36 months for certain circumstances like divorce or the death of a spouse

How Much Does COBRA Cost for a Family of 4?

For a family of four, the cost of COBRA can be much higher than what they paid while the primary earner was employed. This is because, under COBRA, families are responsible for both their share of the premium and the portion that was previously paid by the employer.

Monthly Premium Breakdown

In 2023, the average cost of a family health insurance plan was approximately $1,997 per month. Under COBRA, an additional 2% administrative fee is added, bringing the total to about $2,036 per month for a family of four. This means families must cover the entire premium that was previously shared between the employer and employee.

Factors Influencing COBRA Costs

Several factors influence the cost of COBRA, including:

• The type of health plan
• The level of coverage
• Geographic location

Plans with lower deductibles or broader coverage tend to cost more. Health Maintenance Organization (HMO) plans typically offer lower premiums than Preferred Provider Organization (PPO) plans.

In addition, the cost varies by state, with premiums ranging from $373 per month in New Hampshire to as high as $948 in Alaska for individual coverage, and these variations extend to family plans as well.

Alternatives to COBRA for Families

Given the high cost of COBRA, many families explore other health coverage options that may offer lower premiums or additional benefits.

1. Marketplace Plans

Health Insurance Marketplace plans, established under the Affordable Care Act, are a popular alternative to COBRA. On average, these plans cost around $477 per month, but this can be significantly lower with subsidies.

Families may qualify for premium tax credits, which can reduce the monthly premium cost, making Marketplace plans a more affordable option for many.

2. Medicaid and CHIP

Medicaid offers free or low-cost health insurance for families with incomes below 138% of the federal poverty level. In 2024, this translates to an income of $31,200 for a family of four.

The Children's Health Insurance Program (CHIP) provides coverage for children in families who do not qualify for Medicaid but still need assistance with health insurance. Both Medicaid and CHIP are valuable alternatives to COBRA for families who meet the income eligibility criteria.

Wrap Up

For a family of four, monthly COBRA premiums can exceed $2,000, which can be a substantial financial burden. However, alternatives such as Marketplace plans, Medicaid, and CHIP offer more affordable options.

Before committing to COBRA, it’s essential to evaluate these alternatives and make the best choice for your family’s healthcare needs and financial situation.

Frequently Asked Questions

How long do I have to decide if I want COBRA coverage?

You have 60 days to decide if you want to elect COBRA coverage. The 60-day window starts from either the date your coverage was lost or the date the COBRA election notice was provided, whichever is later.

Can I drop COBRA if I find a new health insurance plan?

Yes, COBRA coverage can be canceled at any time. It is a month-to-month plan, so you can switch to another health insurance plan, such as a Marketplace plan, whenever you’re ready

What happens if I can’t pay my COBRA premium on time?

COBRA plans must give you a 30-day grace period to make your premium payment. If you do not pay within that time, your coverage may be terminated retroactively to the beginning of the period of coverage

Can I add a newborn or newly adopted child to my COBRA plan?

Yes, if a child is born or adopted during the COBRA continuation coverage period, they are automatically considered a qualified beneficiary and can be added to the plan.