How to Pay for COBRA Insurance

COBRA insurance is the continuation of an employee's health insurance after she leaves a job. COBRA stands for the Consolidated Omnibus Reconciliation Act, the 1986 law that requires health insurance plan sponsors with more than 20 full-time employees to continue covering these workers and their families at group rates. The plan assures continuation of benefits in the event of layoff, termination (except for cause) or loss of benefits to family members due to the death or retirement of an employee or the employee's enrollment in Medicare.

Instructions

• 1

  Shop around. You may be able to find quality coverage on your own at a lower premium than is available under COBRA. This is especially true if you and your family are in good health and relatively young. You can also increase your deductible to lower your overall insurance premium. However, if you or a family member has a pre-existing condition, you may have fewer options outside of COBRA.

• 2

  Ask about a severance package. Depending on the circumstances, some companies may offer a severance package to help fund COBRA costs and assist you with a career transition.

• 3

  Use retirement funds. Generally, the IRS charges a 10 percent penalty on withdrawals before age 59-and-a-half. However, the IRS waives that penalty on IRAs when the amount withdrawn is not more than the amount necessary to pay your health insurance.

• 4

  Deduct health expenses from your income tax. In order to do so, you will have to itemize deductions. It is possible you will be better off taking the standard deduction, however, rather than itemizing. You can deduct personal health insurance and unreimbursed medical expenses only to the extent that they exceed 7.5 percent of your income.

• 5

  Start a business. Health insurance premiums are tax deductible for the self-employed. If the health insurance is a business expense, it is not subject to the 7.5 percent of adjusted gross income threshold. This could effectively lower your premium payment, after taxes are taken into account.