The Sharp Bite of COBRA Insurance - The Broke Professional

The Sharp Bite of COBRA Insurance

So I’m self employed now. I made the change about 6 months ago and am winding down from being an employed optometrist. Working for the man can become tiring.

But one thing working for the man did provide was health insurance at an affordable price. Now that I’m not employed full time, we had to fend for ourselves in the glorious US healthcare system.

Most large companies provide some sort of subsidized health insurance for their employees. You sign up for the plan, and the premium is taken out of your paycheck. Employers will usually foot half the premium while you pay the rest. Not a bad deal AT ALL!

In my case, it was a 50/50 split. I paid about $630 per month and my employer paid $630. The plan was a pretty decent HSA eligible plan so it worked well for us.

Once I left the company, I had 3 options:

-Stay on the current health plan aka COBRA

-Find a plan on the marketplace

-Sign up for some other “alternative” types of insurance such as preferred risk plan and health sharing plans.

The marketplace plans were much too expensive and we didn’t qualify for the health sharing plans since you have to be Christian to join them. And I don’t think they accept fresh converts.

So we decided to go with COBRA. And it has been an experience to say the least. Let me first give you an overview of COBRA insurance.

Premium times two

COBRA stands for Consolidated Omnibus Budget Reconciliation Act. Definitely not as scary sounding as the acronym. It’s a federal law that allows for health benefits to continue for someone who has experienced a job loss or other major life changes.

In my case, by signing up for COBRA we could continue on our current insurance plan without any interruption. Sounds pretty easy right? It is, but it comes with a price.

When I was employed full time, I paid $630 a month and my employer paid $630 a month to cover the monthly premium. But on COBRA, I have to pay the entire $1,260 premium on my own.

The law says I can be charged up to 102% of the premium, which I certainly was. Along with dental insurance which I paid very little for with my employer, my grand total came out to be about $1,400 per month.

The sort of good thing is, I knew this going in and factored it into my decision when becoming self employed. But going from $630 a month to $1,400 a month for health insurance is still taking some getting used to.

So while it was nice to continue my health plan and maintain all the deductibles I had already met, the monthly premium was not so nice.

Silver Linings

Health insurance is an issue for the self employed no doubt about that. Any entrepreneur will tell you that. But its not all bad.

While I do have to pay for health insurance directly from my checking account, the premiums will be an above the line tax deduction. This is pretty much the same as having a pre-tax deduction being employed, so it’s not really an advantage. But it’s nice to know I’ll be getting similar tax savings.

Being able to continue my coverage with COBRA also allowed us to keep our deductibles. We had kind of a busy healthcare year early on so we already met our deductible before I left the job. So it’s nice to have a few months of no more deductible to worry about.

Especially since there is another baby on the way! That’s right, number 3 is around the corner so it’s imperative that we keep those deductibles met for all the hospital bills.

So while health insurance can be a drag for the self employed, there are options. And you need to compare and see what the best option is for you and your family.

Even if it is a snake bite from a COBRA. Which I hope is a covered treatment!

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