1. Compared to the cost of COBRA, premiums are much lower
2. Compared to the benefits you once had, Individual Health Insurance seems to offer less

But fear not! When expectations are set correctly, Individual Health Insurance will almost certainly prove to be a valuable investment.

Here’s what you need to know when making the change:

The good:

1. The overall cost of your Individual Health Insurance plan will most likely be lower than the cost of Group Health Insurance.
2. There are many flexible options, including tax advantaged  HSA qualified plans
3. If you’ve exhausted all other forms of coverage, including COBRA, you are guaranteed coverage under HIPAA (Health Insurance Portability and Accountability Act)

1. You must medically qualify.
2. Your pre-existing conditions will most likely not be covered immediately (There are a few exceptions to this)
3. Your deductible and co-pays on an individual health insurance plan will almost certainly be higher compared to a group health insurance plan
4. The list of exclusions is greater. (Benefits for Pregnancy, Mental Health and more are much more restrictive)

All that said, Individual Health Insurance still plays a very valuable part in one’s strategy to protect themselves from catastrophic medical expenses. In many ways, Individual Health Insurance works like auto insurance.

Put quite simply, Individual Health Insurance is priced and designed to only cover the unforeseen, whereas Group Health Insurance is priced and designed to cover the unforeseen plus the things that have already happened.

Here’s the scenario. An employee leaves their job for any number of reasons and soon gets a COBRA packet in the mail. Surprise! To keep the health insurance benefits they once had at their job, they’re asked to pay so much more than they were paying on the job.

But is COBRA really expensive? Sort of.

The reality is that Health Insurance is expensive. COBRA is simply a reflection of the true cost of the Health Insurance.

So why the jump in price?

During employment, the employee and the employer share in the cost of Health Insurance. But once the employee leaves, the Employer is no longer required to pay their portion, leaving the entire Health Insurance premium to the ex-employee. (There’s also a small processing fee added)

Why the sticker shock? The “blame” falls squarely on the shoulders of a very generous employer. Most employees never realize that their employer is paying a huge portion of the their Health Insurance premiums. Employees generally assume that the money coming out of their pay check is paying for the entire Health Insurance premium. Because most employers never properly explain this, there’s a general ignorance to the true cost of Health Insurance.

In the end, COBRA is expensive because Health Insurance is expensive. If COBRA premiums are not affordable, one should speak with a licensed insurance professional on other options.