3 months on COBRA health insurance cost my family over $8,000, but it was our lifeline when my wife needed care
- I'm a freelance writer and my wife's a nurse, which means we rely completely on her employer-provided health insurance.
- Usually, it's great. But when my wife switched jobs? Not so nice. The Cadillac coverage we normally got from her work translated to COBRA payments in excess of $2,700 per month - for two people in their 30s.
- But when we needed it, COBRA was still worth it because my wife has a chronic illness that requires regular care.
- Read more personal finance coverage.
I'm no expert at this whole freelance writing thing. But if I could give one piece of advice to my colleagues, it's this: find and marry someone with excellent health insurance.
Aside from being a wonderful partner, my wife is also a specialist nurse in a high-demand field. Her role comes with rock-solid stability and fantastic benefits. The low deductibles and minimal out-of-pocket expenses are beautiful things. What more could a freelancer ask for?
When my wife changed jobs, however, it was another story. Those benefits translated to extremely expensive COBRA health insurance payments. To the tune of $2,700 per month for two people in their 30s.
While a lot of younger folks would look at that price tag and run away to the marketplace, my wife and I eventually came to the conclusion that we had no choice but to shell out.
How we ended up with COBRA coverage
One day a little more than six months ago, my wife and I were living in Omaha, Nebraska. We were about to step into a movie when she got a phone call from a hospital in New York City. She was crying when she hung up. From happiness.
"I got the New York job," she told me.
We'd been wanting to move to New York for years. She'd already made a couple flights out there to interview with hospitals, and we'd been in suspense ever since. Now, with this job offer in hand, we could finally make it happen.
A whirlwind of logistics came next as we figured out how to ditch our Omaha apartment, find a place in Brooklyn, and set up life in a new city.
Health insurance was an after-thought. We figured we'd stay on her old company's insurance until her New York job's insurance kicked in, and all would be well.
But there was an issue. Her new job came with a probationary period for new employees. She wouldn't be eligible to join their plan for 60 days.
On top of that, my wife has a chronic illness, one that requires some expensive, recurring medical treatments.
In other words, going without coverage wasn't an option. We needed insurance for those 60 days.
Enter the COBRA.
How does COBRA work, anyway?
Let's talk about what COBRA is, and how you sign up.
COBRA is the federal law that entitles you to stay on your employer's health insurance plan for up to 36 months after you leave your job. Somewhat confusingly, nothing in COBRA's name makes any mention of health insurance. (COBRA stands for the Consolidated Omnibus Budget Reconciliation Act).
Within 45 days of your last day at work, you'll get a letter in the mail from your previous company. It will outline what you're supposed to do - including who administers the company's COBRA plan, where you should send your paperwork, and, most importantly, the cost.
And there's the big catch.
While COBRA lets you stay on your employer's plan, your employer doesn't have to help pay for it anymore. You're on the hook for the entire monthly premium.
Trust me, you'll miss their contribution.
Between insurance premiums, copays, coinsurance, and out-of-pocket expenses, it takes about $20,000 each year to cover an American family's healthcare expenses. A truly eye-watering total.
While you're in your job, your employer is probably taking care of the lion's share of those costs. Employers in America shell out around $15,000 per household per year on their employees' healthcare, at last report.
That's 75% of the tab. When you leave your position, you leave that $15,000 behind, too. Which is why COBRA payments can be so enormous.
At least, that's how it worked out for my wife and me.
The day the COBRA bill came
In the days leading up to our New York move, scarcely a week would go by without us dropping a couple grand on something.
$2,000 to break our lease in Omaha. $2,000 for movers and a truck. $2,000 for a security deposit on the new apartment, plus $2,000 for first month's rent. (And we considered that a bargain. No broker's fee or last months' rent requirements!)
It was like someone ripped the stopper out of our savings, and it was all spinning down the drain.
At this point, we knew that we'd need to pay for COBRA coverage, but the letter from my wife's employer hadn't come yet. We were guessing at - and budgeting for - the cost of the monthly premiums.
How much could it be? $1,200? $1,500 at the most? We could handle that.
When the COBRA letter came, it floored us. Our premiums would be $2,753. Almost double the maximum we were budgeting for.
That letter spurred a stint of frantic phone calls and calendar calculus. We wanted to pay as few of those monthly payments as possible. Since my wife's probationary period was 60 days, we were hoping we could get away with just two months of coverage.
We spent hours on the phone. Calling my wife's new HR office to figure out the exact date her insurance would begin. Calling my wife's old HR office to find out when in the month her COBRA coverage would have to be renewed. Calling her doctor's office to do anything they could to shift her chronic illness treatment to earlier in the calendar year.
No dice. We couldn't move things around enough. We would be on the hook for three full COBRA payments - or nearly $8,300.
It hurt. But we did it anyway. In the end, we had no choice.
The takeaway: Do your own COBRA calculations
For us, the risk/reward math didn't work in our favor. We didn't dare go without healthcare coverage while my wife needed treatment, nor did we want to risk gambling on pre-approval from a new plan on the marketplace. What if it didn't come on time? That would mean my wife would go without treatment. Not an option.
We were stuck. For you, that might not be the case. Between jobs, you might be willing to ditch COBRA's high price tag for a more affordable plan on the marketplace. Or, if you really love to live dangerously, you might opt to go without healthcare coverage at all. (Not something I'd recommend, personally.)
The $8,300 hit to our savings was painful. Especially as we wanted to get out and explore our new town. But looking back, it was a small price to pay for peace of mind, knowing that my wife would be in a great new job in a great new city - and healthy while she was doing it all.
How do you put a price on that?
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