The reason COBRA insurance is so expensive.
Many of my patients have experienced “sticker shock” when their COBRA statement comes due after leaving a job, and show up at the pharmacy perplexed at how expensive their new premium was. They often times will pay full price for whatever medications they can afford, often having to triage their disease states. This can wreck havoc on adherence and their health. What is it that people don’t know about COBRA and their employer healthcare plan?
It all started back in 1985 with the Consolidated Omnibus Budget Reconciliation Act (COBRA)under President Reagan. This hot little piece of lawyer-lingo basically forced employers in the U.S. to offer you health insurance after leaving a job. Well, in actuality there’s a whole host of situations where COBRA applies, such as death of a spouse or divorce, but for our sake we will just say that — if you leave your job, your employer is required to give you the option to continue to be part of your existing policy for up to 18 months in most cases.
You may be asking — why is it so expensive, if I’m just continuing on the same insurance plan? Let’s take a deeper look.
When your employer offers you health insurance, what they’re actually offering is the chance to buy into a shared subscription to a health benefit they have agreed to purchase from a health plan.
Did I lose you? Let’s try it this way.
Say there’s a gym in your town where all the best athletes work out, they have great staff, great trainers, great equipment — top notch facilities. The gym costs $100 per month. Now let’s pretend that you are an athlete, and your coach offers you a membership for only $1 per month. Awesome, right? Well, what the coach may not have told you, is that he is actually paying the other $99. But because he wants you to get better and perform well for the team, he’d gladly invest in you.
Likewise, your employer also invests in you. They offer a great healthcare package and pick up the bulk of the cost, often times to incentivize you to come work at the company. According to COBRA however, if you leave your job you’re welcome to keep the health plan, but it’s up to you to pay the full price of the policy. That amazing plan you’re paying $100 or $200 per month for through your employer, suddenly becomes $1000 or $2000 per month when you leave your job.
Some studies cite that employer compensation in the form of healthcare benefits, can sometimes be up to 30% of a worker’s annual salary. Think about that for a second and realize how expensive these policies really are.
Armed with this knowledge I hope that you (as a patient) or you (as a practitioner) are better able to use or pass on knowledge of the COBRA healthcare coverage rules.
All the best,
Joel Rivera, PharmD
