Is health insurance worth it? Why is COBRA so expensive?

Our health insurance system is deeply flawed, but you absolutely should have health insurance.

Health insurance was a very good, very simple idea that has, most unfortunately, become one of life’s bigger nuisances. The basic idea: Everyone pays a little bit of money each month in exchange for the security of knowing their medical expenses won’t be outrageous. The execution, though, has become a morass of copays, deductibles, and claims that can make the basic principle seem pointless. Why pay for insurance each month if you’re just going to be charged $4,000 when you go to the doctor anyway?

That being said, know this: Health insurance is absolutely worth it (if you can afford it). Health insurance is worth it the minute you get into a car accident or you get emergency oral surgery. It may be tempting, when you turn 26 or when you face your first “insurance fee” discussion, to opt out of it but don’t. Figure out how to get it.

First off, what is health insurance and how do I get it?

Health insurance is effectively a monthly subscription to healthcare services, which Americans currently obtain either through a private insurer or a public program like Medicare or Medicaid. For the insurance, you pay a monthly fee, called a premium, which goes toward keeping the insurance company, ostensibly, afloat. (In reality, they are making billions of dollars of profit.). Then, when you need medical services, your insurer should pick up the tab—either the entire payment or part of it.

There are a couple of ways to obtain private insurance. You can purchase a private plan independent of an employer, or you can enroll in your company’s health plan. Health plans sponsored by an employer are called “group” health plans. Many Americans rely on health insurance from employers; according to research from the Kaiser Family Foundation, around 49% of Americans are enrolled in a group health plan.

Health insurance independent of an employer can be purchased via an agent or a broker who will connect you to a plan that fits your needs.

Shop the healthcare marketplace at HealthCare.gov

Medicare

Public health plans are more restricted. Medicare is the federal program for people over 65 and people with certain chronic health conditions. You can only enroll in Medicare if you fit the criteria. (The Kaiser Family Foundation reports that Medicare covers 14% of the population.)

Medicaid

Medicaid is a state-administered program for people whose incomes cannot support health insurance. Created in 1965 via an amendment to the Social Security Act, Medicaid covers 20% of Americans, according to research by the Kaiser Family Foundation.

See: I’m Turning 26. What Should I Do About Health Insurance?

What is COBRA?

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1985, a bill passed to ensure that Americans can temporarily hold onto their insurance after they leave a workplace. It is meant to protect workers from staying at jobs exclusively for the health insurance benefits, and allows for continuation of healthcare benefits in the events of voluntary or involuntary termination, layoffs, reduction of hours, or death of the employee (in the event that the employee has dependents). The coverage period is not indefinite; depending on your plan and the nature of the termination, COBRA can last either 18 or 36 months.

Employers may also extend this coverage beyond that of 36 months, although they are not legally obligated to do so.

Why is COBRA so expensive?

COBRA allows you to stay on your employer’s health plan, but your employer stops paying their part of your premium. This means that you must pay the full premium – and your monthly health bill will be slightly more expensive. According to the Department of Labor, COBRA rates should still be less expensive than free market private insurance rates. However, you should still shop around: If your employer presents you with COBRA after a layoff or termination, make sure the cost is not higher than something you might find on the market.

Is health insurance worth it?

As of 2019, according to the Kaiser Family Foundation, Americans on group health plans paid an average of $1,427 per year toward health insurance. The KFF found that in 2016, the average out-of-pocket cost for a person on Medicare was $5,806.

Medicaid recipients the same year had an average out-of-pocket cost of $2,665. Now, per Healthcare.gov, the average cost of a three-day stay in the hospital is $30,000 without health insurance. And these bills do not necessarily go away: Hospitals have begun suing patients to get their money.

Having no insurance is easy…until you need it. You may get away with it. You could spend an entire year without stepping foot in a doctor’s office. It is more likely, however, that you will need health coverage in some form, be it for something as banal as a pap smear or something as serious as a car accident.  

You may have insurance and still be met with surprise bills. The good news is the government is working on a solution for this. Congress is currently considering a bipartisan bill which would ban surprise medical bills. The details on the ban are scant, but both Democrats and Republicans have placed the issue on high priority.

Will I have to pay a tax penalty in 2019 if I did not have health insurance?

No. The Affordable Care Act introduced a fee called the “Individual Shared Responsibility Payment” which taxed eligible Americans who opted out of health insurance. The Tax Cuts and Jobs Act, which Trump signed into order in 2017, rolled back this penalty, so it no longer applies. And so be it: According to reports, the penalty, which was meant to encourage young people to enroll in health plans, did not appear to work. The IRS told the New York Times that in 2014, 8.1 million tax returns included the individual shared responsibility payment.

Learn more about health insurance and affording medication

I'm in the Medicare donut hole. What now?

How can patients reduce prescription drug costs at the pharmacy counter?

Do online pharmacies accept U.S. Medicare insurance?

Do you have questions or concerns about medication savings, whether locally or online? We’re here to help.

Comment below or ask a question by logging in to My PharmacyChecker.