What's the issue with Cobra?

[megacorp-firee]

I am about to FIRE and one of my choices is to do COBRA with my current (pre-retirement) megacorp plan. It acutally costs less than the retirement 'benefit' (by about $110/month/person).

Is this unusual because it is linked to megacorp plan or ? A lot of the posts seem to wave people off of COBRA plans.

Guidance would be appreciated. Thanks

[SamHouston]

That cost relationship makes me wonder just how expensive your pre-retirement plan was.

When I retired a couple of months ago I found that COBRA rates were about three times as costly as my pre-retirement rates. Luckily my retirement plan allows me to keep the same coverage for only about 25% more than I paid for it as an employee.

[megacorp-firee]

For Medical Insurance ONLY
Pre-Retirement: PPO for me and DW (low deductible) - $87/month, YEAH cheap!
Retirement: COBRA, same PPO - $642.60/month

Cheapest post-retirement PPO offered by company
HIGH Deductible: $1048.66/month, and the rest are worse
... except for HMO for $867.86/month

Outside BCBS High deductible plan can be had for both of us: $465/month

I have a 'bucket o' money' that will subsidize our medical insurance, but the 'gotcha' is that you have to purchase the post-retirement policies that the company offers (yes, the highest price ones, of course).

The insurance companies are smart enough to vary their benefits so that it is difficult to have an apples to apples comparison vs. price.

So I think I understand what I need to do, take bucket of money and buy mine from company and go outside and get policy for DW for cheaper.

What I was wondering is how I lucked out on the COBRA ... which will last only 18 months. Anyone else see this? From what I gathered from other posts, COBRA for most is a bad deal.

[SamHouston]

My company rep told me that COBRA charges 102% of the cost that was previously paid by a combination of the company and the employee for coverage. The extra 2% is supposedly to cover administrative fees and the like. I wonder if that means that you and the company were paying $630 in total for your coverage prior to you leaving the company?

[megacorp-firee]

If that is the case, then the company was paying the lions share of it. I was paying $87/month. hmmm, I guess I'll have to take back some of those nasty things I said about them

What was your experience of COBRA costs for you and spouse? how much per month? am I in the ball park or ? (we are 56 years old) curious

[mykidslovedogs]

Quote:

Originally Posted by megacorp-firee If that is the case, then the company was paying the lions share of it. I was paying $87/month. hmmm, I guess I'll have to take back some of those nasty things I said about them What was your experience of COBRA costs for you and spouse? how much per month? am I in the ball park or ? (we are 56 years old) curious

Most people don't understand that all "COBRA" is, is a continuation of coverage under the same plan you were on before, only with you paying the entire premium instead of your employer contributing to most of it.

The 2% admin fee is for all of the notices that have to be generated for COBRA compliancy. We do it for free for our customers, but it really is a LOT of work, and 2% is a minimal charge for the amount of time that goes into the compliancy notices.

[megacorp-firee]

geez, if that is the case, then I wonder why they don't just offer the retiree's the same policy as the workers for the full price. The post-retirement policies all cost a bunch more than the COBRA plan.

That doesn't seem logical, unless there is some law prohibiting the company from offering retirees the same policies... :confused: or logically I guess we old f**ts would push up the rates for the youngsters still slaving away. if they did so...

This is educational...

[Martha]

Quote:

Originally Posted by megacorp-firee That doesn't seem logical, unless there is some law prohibiting the company from offering retirees the same policies... :confused: or logically I guess we old f**ts would push up the rates for the youngsters still slaving away. if they did so... This is educational...

No law, it is just that the retirees are expensive. Retiree health benefits have pushed more than one company into bankruptcy.

[SamHouston]

Quote:

Originally Posted by megacorp-firee If that is the case, then the company was paying the lions share of it. I was paying $87/month. hmmm, I guess I'll have to take back some of those nasty things I said about them What was your experience of COBRA costs for you and spouse? how much per month? am I in the ball park or ? (we are 56 years old) curious

I don't recall the exact numbers but I remember that for the two of us we would be paying COBRA rates of over $1200 per month. Luckily, my company offers special group rates to its retirees that will run me about $480 per month. However, my company just had a massive layoff (that pushed me into early retirement about a year sooner than I'd planned) and those who were let go before they reached the age of 55 are faced with COBRA rates after six months of having been let go. I'm 58.

[megacorp-firee]

Looks like it's 'standard answer number 1': It Depends.

[AlmostDone]

Quote:

Originally Posted by megacorp-firee What was your experience of COBRA costs for you and spouse? how much per month? am I in the ball park or ? (we are 56 years old) curious

For DH (61) and me (57), it would be $846 a month for my current BC/BS policy. That's 102% of the cost while employed.

[megacorp-firee]

Quote:

Originally Posted by AlmostDone For DH (61) and me (57), it would be $846 a month for my current BC/BS policy. That's 102% of the cost while employed.

A little more than we will have to pay.
What's it going to cost when COBRA 18 months is up?