COBRA Health Insurance: How to Calculate What You'll Actually Pay Per Month

The COBRA Premium Is Never What You Paid at Work

Your COBRA election notice shows the full group premium, not the slice your paycheck absorbed. Under the Consolidated Omnibus Budget Reconciliation Act of 1985, plan administrators may charge the terminated employee 100% of the group rate plus a 2% administrative fee. Your employer stops contributing the moment coverage ends.

The formula is straightforward.

True COBRA Monthly Premium = Full Group Premium x 1.02

The "full group premium" is the combined employer-plus-employee cost, not the line item on your last pay stub. Request this figure directly from your HR department or benefits administrator before your 60-day election window expires.

What the Full Group Premium Actually Includes

The group premium your employer reported to the insurer covers four cost components. Understanding each one prevents underestimating your bill.

Employee-only or family tier cost. Premiums scale by coverage tier: employee-only, employee-plus-spouse, employee-plus-children, or family. Your COBRA rate reflects whichever tier you were enrolled in on the qualifying event date.

Employer subsidy. In 2025, employers covered an average of 83% of employee-only premiums and 73% of family premiums, according to the Kaiser Family Foundation's Employer Health Benefits Survey. That subsidy drops to zero on COBRA.

Plan type. HMO, PPO, and HDHP plans carry different total premiums. A PPO with a broad network routinely costs $200 to $400 more per month than an HDHP at the group level.

Administrative surcharge. The 2% fee, authorized under 26 U.S.C. Section 4980B, applies to the full group premium before any subsidies are considered.

Worked Example 1: Single Employee, PPO Plan

A software engineer in Austin, Texas loses her job. Her pay stub showed a monthly deduction of $214 for a PPO plan. She assumes COBRA will cost roughly $214.

The actual group premium for her PPO tier is $1,040 per month. Her former employer absorbed $826 of that. Under COBRA, the administrator charges 102% of $1,040.

$1,040 x 1.02 = $1,060.80 per month

She pays $1,060.80, not $214. The gap is $846.80 per month, or $10,161.60 over a 12-month period. Her 60-day election window started the day her coverage ended. Waiting three weeks to open the notice has already cost her 21 days of that window.

Worked Example 2: Family Coverage, HDHP Plan

A marketing director in Chicago elects family coverage on an HDHP paired with an HSA. His monthly payroll deduction is $389. The full group premium for his family tier is $1,820 per month. His employer covered $1,431 of that.

COBRA cost = $1,820 x 1.02 = $1,856.40 per month

That is $1,467.40 more per month than his payroll deduction suggested. Over the 18-month maximum COBRA continuation period allowed for most qualifying events under 26 U.S.C. Section 4980B, his total out-of-pocket premium outlay reaches $33,415.20.

His HSA remains available for qualified medical expenses during COBRA. He cannot make new pre-tax payroll contributions to the HSA once employment ends, but he may contribute directly to the account up to the 2025 IRS limit of $8,300 for family coverage and deduct that amount on Schedule 1 of Form 1040.

The Tax Shift Nobody Mentions

Employer-sponsored premium contributions are excluded from gross income under IRC Section 106. Your employee share came out pre-tax via a Section 125 cafeteria plan. Both tax advantages disappear under COBRA.

COBRA premiums are paid with after-tax dollars unless you are self-employed, in which case you may deduct 100% of the premium on Schedule 1. Otherwise, you can deduct COBRA premiums only as a medical expense on Schedule A if your total medical expenses exceed 7.5% of adjusted gross income. Few people clear that threshold.

For a single filer earning $85,000 in AGI, the 7.5% floor is $6,375. Only COBRA costs above that figure become deductible. On $1,060.80 per month, annual COBRA spending reaches $12,729.60. The deductible portion is $12,729.60 minus $6,375, or $6,354.60. At a 22% marginal rate, the actual tax savings total $1,398. That is meaningful but well below what pre-tax payroll treatment would have provided.

COBRA vs. ACA Marketplace: The 60-Day Decision

Losing employer coverage is a qualifying life event under the Affordable Care Act. It triggers a 60-day Special Enrollment Period on the federal or state Marketplace. The COBRA election window runs concurrently, also 60 days.

A family with household income at 250% of the Federal Poverty Level qualifies for an Advanced Premium Tax Credit that can reduce a Silver-tier Marketplace plan to $300 to $600 per month, well below the $1,856.40 COBRA figure in Example 2 above. The exact credit depends on household size, state, and plan selection. Healthcare.gov provides a subsidy estimator.

Run both numbers before electing COBRA. COBRA preserves the exact same network and deductible accumulation. A Marketplace plan resets deductibles. If a family member is mid-treatment with a specific provider network, COBRA continuity carries real clinical value that the premium difference does not capture.

How to Request the Full Group Premium Figure

Call the plan administrator listed on the COBRA election notice. Ask specifically for the "total monthly premium for continuation coverage" broken down by tier. Federal law requires the plan administrator to provide this figure. Cross-check it against your Summary Plan Description or the employer's annual Form 5500 filing, which is publicly available through the Department of Labor's EFAST2 database.

Do not estimate the full premium by reverse-engineering your pay stub deduction and guessing the employer share. Employer contribution percentages vary by employer, plan tier, and collective bargaining agreement. The only reliable source is the plan administrator's written disclosure.

Calculate Your True Number Before the Window Closes

The 60-day COBRA election window is not a formality. It is the decision boundary between three meaningfully different outcomes: COBRA continuation, ACA Marketplace enrollment, or a short coverage gap with potential IRS penalty exposure under state mandates in Massachusetts, New Jersey, California, and several other states.

The CalcMoney COBRA cost calculator lets you input your full group premium, coverage tier, household income, and state. It returns your true COBRA monthly cost, your estimated Marketplace premium after subsidy, and the 12-month and 18-month total cost comparison side by side. Run the numbers before day 60, not after.

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Results are estimates for informational purposes only. Consult a licensed financial professional before making financial decisions.