When you leave a job, you usually get two coverage options for the gap: COBRA, which lets you keep your old employer plan, or a marketplace plan, which you buy under a Special Enrollment Period.
Most people I help in this situation start by assuming COBRA is the safer choice because it is familiar. Then they see the price.
Here is how the two stack up and how to think about the trade-off.
What COBRA actually is
COBRA is a federal law (and similar state mini-COBRA laws for smaller employers) that lets you keep your existing employer-sponsored health plan for a limited time after a qualifying event.
The key qualifying events are:
- Voluntary or involuntary termination of employment (except for gross misconduct)
- Reduction in hours
- Divorce or legal separation from a covered employee
- Death of a covered employee
- A dependent child losing dependent status (typically age 26)
- The employee becoming entitled to Medicare
You keep the same plan, network, deductible (subject to mid-year reset rules), and benefits.
The price is the catch. The employer was paying most of the premium while you were employed. Under COBRA, you pay the full premium plus a 2 percent administrative fee.
A common monthly COBRA cost for family coverage runs into four figures. The exact number is whatever your plan total premium is. The COBRA notice from your former employer or its administrator will tell you the dollar amount.
What a marketplace plan offers
A marketplace plan is independent of the employer. You pick the plan, the network, and the metal tier.
Job loss is a qualifying life event that opens a 60-day Special Enrollment Period for marketplace coverage. You can enroll up to 60 days before or 60 days after the loss.
If your household income now qualifies for a premium tax credit, the marketplace plan can be dramatically cheaper than COBRA. People used to high incomes are often surprised by how much credit they qualify for when employer income stops.
The downside is network. You may have to switch doctors and hospitals if your current ones are not in the marketplace plan network. Mid-treatment situations make this hard.
Side-by-side comparison
| Factor | COBRA | Marketplace |
|---|---|---|
| Cost | Full premium plus 2 percent. No subsidy except temporary federal programs in past emergencies | Post-subsidy premium can be much lower. Subsidy based on household income |
| Network | Same as job plan | Plan you choose from marketplace options |
| Plan choice | Stuck with what the employer offered | Wide choice (Bronze through Platinum, multiple insurers) |
| Deductible status | Continues from job plan within the same calendar year | Resets to zero on the new plan |
| Duration | Up to 18 months (sometimes 29 or 36) | As long as you remain marketplace-eligible |
| Election window | 60 days after qualifying event | 60 days before or after qualifying event |
| HSA compatibility | Depends on the plan (the underlying plan, not COBRA itself) | Depends on the plan you pick |
| Family enrollment | Same as job plan | Can mix kids on CHIP, adults on marketplace |
When COBRA is the right call
There are real cases where COBRA wins.
You are deep into the deductible or out-of-pocket maximum for the year. A new marketplace plan resets both. If you have already spent thousands, finishing the year on COBRA can be cheaper than a marketplace plan with a fresh deductible.
You are in the middle of a treatment plan with specific doctors. Continuity of care can be worth the cost.
You expect a short gap. If you have a new job starting in a few weeks with coverage day one, COBRA for the gap is a clean bridge. You can elect COBRA late, pay back premiums only if you actually need to use it, and stay covered retroactively.
You have a complex specialist network. Specialty care in oncology, transplant, or rare disease often runs through a specific health system. Switching networks mid-care is risky.
You have an HSA-incompatible mix. If your HDHP is letting you keep contributing, switching plans changes that math.
When a marketplace plan is the right call
You qualify for a meaningful premium tax credit. Income from severance, unemployment, and partial-year wages can put you in subsidy range even if you earned a high salary in earlier months.
The gap is long. COBRA gets expensive over many months. A subsidized marketplace plan may cost a fraction.
Your job plan was not a good fit anyway. If you wanted to switch, COBRA preserves a plan you did not love.
The marketplace plan has equivalent or better networks. In some areas, marketplace plans use the same major hospital systems.
A timing trick people miss
Under federal law, you have 60 days from your qualifying event to elect COBRA. You also have 60 days from the qualifying event to enroll in a marketplace plan under the SEP.
If you elect COBRA and then change your mind in the same 60-day window, you can usually drop COBRA and take the marketplace SEP. Outside that window, dropping COBRA voluntarily does not trigger an SEP. You would have to wait for the next Open Enrollment or for COBRA to fully exhaust.
This matters because the two clocks run side by side for 60 days. Run the marketplace numbers with your post-job income before you elect COBRA. If marketplace looks better, take it.
If COBRA looks better in the short term but you want flexibility, you can elect COBRA late (pay the back premium if needed) and use the SEP for marketplace if you change your mind within the 60-day window.
After 60 days, COBRA becomes the only easy option until COBRA exhausts.
How to run the comparison
Pull the COBRA election notice. It states the monthly premium and election deadline.
Go to HealthCare.gov or your state marketplace. Start an application using your expected next-12-months income, not your past income. Severance and unemployment count as income. The subsidy estimator will tell you what your post-credit premium would be on multiple plan tiers.
For each candidate marketplace plan, check whether your current doctors and hospitals are in network, and whether your prescriptions are on the formulary.
Compare three numbers for each option:
- Monthly premium
- Likely out-of-pocket spend for the rest of the year
- Disruption cost (switching doctors, restarting deductibles)
For the marketplace plan, if your year-to-date employer deductible was substantial, count the reset as a cost.
A worked example
Single 42-year-old laid off in May. Had a $1,500 deductible job plan, already spent $1,200 of it, and was halfway through physical therapy.
COBRA: $620 a month. Premium for the rest of the year is about $4,340 (May to December). PT continues at the same provider. Deductible already paid.
Marketplace Silver: $190 a month after a subsidy based on lower expected annual income. Premium for the rest of the year is about $1,330. But the deductible resets ($1,200 to spend again) and the PT provider is not in network on the cheapest Silver, only on a more expensive Silver at $310 a month.
Direct cost difference, COBRA over marketplace at $310 a month: about $2,170 saved if marketplace replaces COBRA.
But: continuity of care, no provider switch, no deductible reset. For an active treatment plan, COBRA might still be worth it.
Two people in the same financial spot can correctly pick differently.
What to do next
Read the COBRA election notice carefully and note the deadline.
Run the marketplace numbers on HealthCare.gov or your state marketplace before electing COBRA.
If you elect COBRA, set a reminder a month before it exhausts. Marketplace SEP starts when COBRA exhausts at its maximum period.
For more context, see our SEP guide, comparison framework, and self-employed coverage.
Sources
Frequently asked questions
How long does COBRA last?
Usually up to 18 months after a qualifying event like job loss or reduction in hours. Some events extend coverage to 29 or 36 months.
Do I have to pick COBRA right away?
You have a 60-day election window after the qualifying event. You can elect COBRA late in the window and the coverage applies retroactively if you pay the back premiums.
Can I switch from COBRA to a marketplace plan?
Yes, but timing matters. Dropping COBRA voluntarily mid-period does not trigger a Special Enrollment Period. Waiting until COBRA exhausts (the maximum period ends) does.
Is COBRA premium tax-deductible?
If you are self-employed, COBRA premiums are not deductible under the self-employed health insurance deduction (which excludes COBRA). They can be paid from an HSA tax-free.
