COBRA vs Marketplace Insurance: How to Decide in Your First 60 Days

Losing employer-sponsored health insurance triggers two simultaneous clocks. You have 60 days to elect COBRA continuation coverage and 60 days to enroll in an ACA marketplace plan through a Special Enrollment Period. Most people assume COBRA is the safer choice because it keeps the same plan. In many situations, that assumption is expensive.

What COBRA actually costs

COBRA allows you to continue your employer's health plan by paying the full premium, both the portion you paid as an employee and the portion your employer paid on your behalf. For most employer-sponsored plans, the employer pays 70-80% of the premium. COBRA shifts that entire cost to you, plus a 2% administrative fee. Monthly COBRA premiums of $600-$800 for an individual and $1,500-$2,000 for a family are common.

What a marketplace plan costs

ACA marketplace plans charge premiums based on age, location, and plan tier. Income-based Premium Tax Credits can significantly reduce the cost for people with household incomes up to 400% of the federal poverty level, and the enhanced subsidies enacted in recent years have extended meaningful credits further up the income scale. A person with modest income during a period of unemployment may qualify for a marketplace plan with a very low or even zero premium.

When COBRA is worth paying

COBRA makes sense in a few specific situations. If you have met a significant portion of your annual deductible on your current employer plan and the plan year is not close to ending, switching to a marketplace plan resets your deductible. If you have upcoming scheduled procedures, surgeries, or treatments that you have already authorized under the current plan, COBRA keeps you in the same network without risk of the provider being out of network on a new plan. If you expect to return to employer coverage quickly (within 1-2 months), the simplicity of COBRA may outweigh the cost difference.

When a marketplace plan is worth switching

If you have met little or none of your deductible, a marketplace plan with similar coverage and lower premiums is almost always the better financial choice during a gap in employment. If you qualify for a Premium Tax Credit, the cost difference can be dramatic. If you are in a period of reduced income, your income for the year may qualify you for better subsidies than you would expect.

The 60-day clock and retroactive coverage

Both COBRA and marketplace Special Enrollment Periods run for 60 days from the date of the qualifying event (loss of job-based coverage). COBRA has a specific advantage: if you elect COBRA, coverage is retroactive to the date it lapsed. This means you can wait until you know whether you have claims during the gap before deciding whether to pay for COBRA. If you have no claims, you can let COBRA lapse. If you have claims, you can elect COBRA retroactively and pay the back premiums.

Marketplace coverage is not retroactive. It begins on the first of the month after enrollment.

State continuation coverage

Many states have "mini-COBRA" laws that provide continuation rights for employees of small businesses not covered by federal COBRA (which applies to employers with 20 or more employees). State continuation coverage options and costs vary significantly. If you worked for a small employer, check your state's Department of Insurance for available options.

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Ready to take action?

COBRA Analyzer can help you compare COBRA costs and timelines with marketplace-style alternatives. ACA Marketplace Plan Comparison can help you model plans and subsidy scenarios for your household.

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Bill Advantage is a document literacy tool. Nothing in this article constitutes legal or medical advice.