Losing job-based coverage triggers two real options: COBRA, which lets you keep your exact same employer plan for up to 18 months (sometimes longer), and a Marketplace plan through HealthCare.gov or your state exchange, which may qualify for income-based subsidies that lower your monthly cost significantly. For most people who’ve had a real drop in income since losing their job, Marketplace coverage with a premium tax credit costs less — but if your income stays high or you’re mid-treatment with specific doctors, COBRA can be worth the extra cost. Here’s how the numbers actually compare.
How COBRA Works
COBRA (the Consolidated Omnibus Budget Reconciliation Act) requires most employers with 20 or more employees to let you keep your group health plan after you leave a job, according to DOL.gov. You get the identical plan — same doctors, same network, same deductible you’ve already partly met for the year.
The catch is price. While you were employed, your employer likely paid a large share of the premium. On COBRA, you pay the entire premium yourself, plus your employer can charge up to a 2% administrative fee, per DOL.gov.
Example: If your paycheck showed you contributing $150/month while your employer covered $550/month, your total plan cost was $700/month. Under COBRA, you’d owe the full $700, plus up to $14 in fees — about $714/month. That’s a jump most people aren’t braced for.
COBRA typically lasts 18 months after a layoff or reduction in hours. It can extend to 29 months if the Social Security Administration determines you’re disabled before the 60th day of COBRA coverage — though the plan may charge up to 150% of the premium during that 11-month extension, or 36 months for certain other qualifying events like divorce or a dependent aging off the plan, according to DOL.gov.
How Marketplace Insurance Works
Marketplace plans, sold through HealthCare.gov (or your state’s own exchange, depending on where you live), are priced independently of your old job. Your cost depends on your household income, family size, age, and where you live — not on what your former employer paid.
Losing job-based coverage qualifies you for a Special Enrollment Period (SEP), a 60-day window to enroll in a Marketplace plan outside the normal fall Open Enrollment window, according to HealthCare.gov. During this SEP you can also apply for a premium tax credit, which reduces your monthly bill in advance rather than as a refund at tax time.
Here’s the key detail that trips people up after a layoff: your eligible subsidy is based on your estimated income for the rest of the year, not your prior salary. If you were earning $70,000 and are now unemployed or in a lower-paying job, your estimated annual household income may drop well below what it was, which often unlocks a much larger tax credit than you’d expect. Some households qualify for a plan with a very low or even $0 monthly premium after the credit, depending on income and the benchmark plan cost in their area.
The enhanced premium tax credits created under the American Rescue Plan and extended by the Inflation Reduction Act expired on December 31, 2025, and Congress has not extended them. For 2026 coverage, the original ACA subsidy rules are back in force — including the “subsidy cliff” that cuts off premium tax credit eligibility entirely above 400% of the federal poverty level, and higher required premium contribution percentages. Check HealthCare.gov for your own numbers before assuming a subsidy amount — this policy change can swing your Marketplace premium substantially.
Cost Comparison at a Glance
| Factor | COBRA | Marketplace |
|---|---|---|
| Premium | Full premium you and employer used to pay combined, plus up to 2% fee | Based on income; subsidies can lower it significantly |
| Network/doctors | Identical to your old employer plan | May differ — check if your doctors are in-network |
| Deductible | Continues where you left off for the year | Resets under the new plan (unless mid-year employer plan carries over, which is rare) |
| Enrollment window | 60 days from losing coverage or receiving election notice, whichever is later | 60 days before or 60 days after losing coverage (Special Enrollment Period) |
| Retroactive coverage | Yes — coverage is backdated to the day after your job coverage ended | No — coverage starts the month after you enroll |
| Income-based discount | None | Yes, if eligible for premium tax credits |
| Duration | Up to 18 months (29 or 36 in some cases) | Ongoing, renewable each year |
Which One Actually Costs Less?
It comes down to one variable: your current household income relative to the federal poverty level.
If your income has dropped significantly since the layoff (unemployment benefits usually count as taxable income, but often less than a salary), a Marketplace plan with a premium tax credit is very likely cheaper than COBRA — sometimes by hundreds of dollars a month. This is the scenario most laid-off workers are in.
If your income is still high — a working spouse’s salary, severance pay counted as income, or a new job that pays close to your old one — your subsidy shrinks or disappears, and COBRA’s full-price premium might land close to or even below an unsubsidized Marketplace plan, especially if you’re older or live in a high-premium state.
If you’re in the middle of treatment for a condition and don’t want to risk switching plans, deductibles, or provider networks mid-year, COBRA’s continuity can be worth paying more for, even if it’s not the cheapest option on paper.
A practical step: run the numbers both ways before your 60-day windows close. Use the subsidy calculator at HealthCare.gov with your realistic post-layoff income estimate, and compare that monthly premium against your COBRA election notice, which your former employer or plan administrator is required to send you within 14 days after your employer notifies the plan administrator — generally up to 44 days from the qualifying event or loss of coverage, according to DOL.gov.
Deadlines You Cannot Miss
Both paths run on 60-day clocks, but they work differently.
- COBRA election: You have 60 days from the later of (1) the date you lose coverage or (2) the date you receive your COBRA election notice to decide. If you elect it, coverage is retroactive to your last day of job-based coverage — no gap.
- Marketplace SEP: Your window opens up to 60 days before you lose job-based coverage and closes 60 days after you lose it — enrolling early is how you avoid a gap. Coverage is not retroactive; it typically starts the first day of the month after you select a plan. Enroll promptly to avoid a coverage gap.
One important nuance: if you elect COBRA first and later decide you want to switch to a Marketplace plan, you generally can only do so during annual Open Enrollment (November 1–December 15 on HealthCare.gov beginning with 2027 coverage; state-run exchanges may set different dates but cannot run past December 31) or if your COBRA coverage runs out or your former employer stops contributing toward the premium (an involuntary loss of coverage). Coverage that ends because you stopped paying the premium does not open a Special Enrollment Period. Voluntarily dropping COBRA early does not, by itself, open a new Marketplace SEP. Decide carefully before you elect COBRA if you think you may want to switch later.
How to Apply
For COBRA:
1. Wait for your COBRA election notice from your employer’s plan administrator (generally required within 44 days of your qualifying event — your employer has 30 days to notify the plan administrator, which then has 14 days to send the notice).
2. Review the premium amount listed — it should show the full cost plus any administrative fee.
3. Submit your election form within 60 days.
4. Pay your first premium within 45 days of electing coverage to avoid termination.
For Marketplace coverage:
1. Go to HealthCare.gov (or your state exchange site) and start an application.
2. Report the job loss as a qualifying life event to trigger your Special Enrollment Period.
3. Estimate your household income for the remainder of the year as accurately as you can — this drives your subsidy.
4. Compare plans by monthly premium after credit, deductible, and whether your current doctors are in-network.
5. Enroll before your 60-day window closes to avoid a coverage gap.
FAQ
Can I switch from COBRA to a Marketplace plan later?
Only in limited situations: during annual Open Enrollment, if your COBRA coverage is exhausted (you hit the 18-, 29-, or 36-month limit), or if your former employer stops contributing toward your COBRA premium. Coverage that ends because you stopped paying premiums does not qualify. Voluntarily canceling COBRA mid-year usually does not create a new Special Enrollment Period, according to HealthCare.gov.
Does severance pay affect my Marketplace subsidy?
Yes. Severance is generally counted as income for the year it’s received, which can reduce or eliminate your premium tax credit for that period. Estimate your total expected income, including severance and any unemployment benefits, when applying at HealthCare.gov.
Is COBRA ever free or reduced in cost?
Not automatically. In the past, Congress has occasionally passed temporary COBRA subsidy programs during economic downturns, but no general COBRA discount exists under standard rules. Check DOL.gov for any current temporary subsidy programs that may apply to your layoff date.
Sources
- U.S. Department of Labor, COBRA Continuation Coverage: https://www.dol.gov/general/topic/health-plans/cobra
- HealthCare.gov, Special Enrollment Periods: https://www.healthcare.gov
- Centers for Medicare & Medicaid Services: https://www.cms.gov
- IRS, Premium Tax Credit: https://www.irs.gov/affordable-care-act/individuals-and-families/the-premium-tax-credit-the-basics
Related reading
- Social Security COLA for 2026: How Much Bigger Will Your Check Be?
- Medicare Open Enrollment: Dates, What You Can Change, and Costly Mistakes
- Medicare Advantage vs Original Medicare: A Plain-English Comparison