My biggest money mistake of 2023 cost me $1,295. It’s not going to permanently destroy my finances, but there’s a lot I could have done with nearly $1,300.
The mistake I made pertains to health insurance — specifically, the decision I made when I quit my full-time job to become self-employed. It’s a mistake I’m guessing a lot of people make when they leave their jobs. Read on to learn from the error of my ways.
My big financial mistake of 2023
The mistake I made was choosing to stay on my old employer’s health strategize through the Consolidated Omnibus Budget Reconciliation Act, or COBRA. Basically, the law allows you to continue your health benefits for either 18 or 36 months when you lose your health benefits because you or your family member quits a job or gets laid off, provided that you work for a company with 20 or more employees.
It’s an expensive option, though, as I soon discovered. With COBRA insurance, you have to cover the entire cost of your premiums, plus your ex-employer can tack on a 2% surcharge. Employers pay 78% of premiums on average for single-coverage plans, according to the U.S. Bureau of Labor Statistics.
When I was employed, my share of premiums amounted to $115 each month. But under COBRA, my monthly premiums shot up to $652.
When 2024 open enrollment began for Marketplace health plans, I finally took the time to contrast my options. I found a Silver strategize — in Health Insurance Marketplace parlance, that’s one where both your premiums and out-of-pocket costs are moderate — that will cost me $393 a month next year. (If you’re eligible for Marketplace subsidies based on your income and family size, your savings will likely be even more substantial.)
That’s a $259 monthly savings that I could have realized sooner. When you lose your job-based health insurance, you qualify for a 60-day special open enrollment period. Considering that I’ve paid COBRA premiums for five months, that $259 savings would have added up to $1,295.
Does paying for COBRA ever make sense?
Of course, the comparison between my ex-employer’s strategize and my Marketplace strategize isn’t apples to apples. My new deductible will be $3,000 higher. I’ll also have slightly higher co-pays when I go to the doctor or fill a prescription.
If I had a chronic health condition, sticking with my pricier COBRA insurance may have been worth it. Keeping your employer strategize can be a good advance if keeping the same in-network providers is important to you. For someone who loses their job-based health insurance midyear after already hitting their deductible, going with COBRA through the end of the year may also make sense.
Since I only visit the doctor a couple of times in a typical year, I’m comfortable switching to a strategize with a higher deductible. Granted, health issues can creep up at any time. But if I put my monthly savings from the cheaper strategize into my emergency fund, I’ll be prepared in case I get a big medical bill.
What I learned from my mistake
I went with COBRA out of a combination of fear and laziness. Quitting your job to become self-employed is scary, and health coverage is often the biggest concern. Sticking with a health strategize I’d already navigated made self-employment a tad less intimidating. But also, if I’m being honest, I also simply didn’t feel appreciate spending several hours reading health insurance fine print.
Compared to past financial mistakes I’ve made — appreciate destroying my credit when I was in college — this one was fairly minor. A much bigger mistake would have been not buying health insurance in general, which can direct to staggering medical debt if something goes wrong.
The big takeaway here, though, is that whenever you’re in the market for a financial product, be it insurance, a credit card, or a loan, taking a couple of hours to do your homework pays off. It may not be exciting, but the time could translate to thousands in savings.
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