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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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COBRA alternative savings calculation

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: You mention that there are "more attractive alternatives to COBRA at a lower price". My concern is in finding an alternative that is less expensive but ALSO covers pre-existing conditions. My daughter's monthly medication bills could get pretty expensive if she didn't have the COBRA coverage, even considering that the COBRA coverage is $400 per month. Any suggestions? I mostly worry about coverage for her ADD medication.

A: This general comment applies to most people but not everyone. Most U.S. households have total medical expenses less than the $400 amount you stated as the cost of insurance. It seems unlikely that ADD medications would change that unless there are significant additional issues. Of course, there are some situations where the cost of treating pre-existing conditions justifies the cost of COBRA coverage, but this is less than 1% of all eligible applicants. Consider this illustration of a more "typical" COBRA alternative election: An employee is about to leave her employer-provided health plan makes a mail-order purchase of 90 days of prescription drug medicine that would otherwise cost $150 per month. She then enrolls in a short term medical plan for $100 per month instead of $400 COBRA plan. Later she purchases 3 more months of medicine out-of-pocket that are not covered by her short term medical insurance but had no other medical expenses. After six months, she is covered under a new employer plan. After the calculations, she spent $600 on insurance and $150 for medicine for a total cost of $ 750. The cost of COBRA would have been $2400, so she saved a net $1,650. Each person who becomes eligible for COBRA and less expensive COBRA alternatives would be smart to do this financial calculation based on the estimates that best apply to their own situation.


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