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COBRA lets you keep your employer’s health plan after you leave the job, and the price shocks almost everyone who elects it. The monthly bill is often three to five times what you paid as an employee. That sticker shock is not a mistake or a penalty. It is the actual cost of the insurance, revealed all at once. Understanding where the number comes from, and the strict payment rules around it, helps you decide whether COBRA is worth it or whether a marketplace plan would cost far less.
The 102 percent formula
As an employee, you paid only your share of the premium while your employer paid the rest. Under COBRA, you pay both shares, plus a 2 percent administrative fee. That is the entire formula: 100 percent of the plan’s total premium plus 2 percent for administration, for a total of 102 percent.
Put real numbers on it using KFF’s latest employer survey. The average annual premium for employer coverage is $9,325 for single coverage and $26,993 for family coverage. Add the 2 percent admin fee and COBRA runs roughly $9,510 a year for single coverage, about $790 a month, and roughly $27,530 a year for family coverage, about $2,295 a month. Your actual plan may price above or below the national average, especially at small firms or in expensive regions, but this is the right order of magnitude. The reason the bill feels so large is that most workers never saw the employer’s share; the average worker contributed only about 16 percent of the single premium and 26 percent of the family premium, so COBRA can easily quadruple what came out of your paycheck.
What the 2 percent covers, and the disability exception
The 2 percent administrative fee compensates the plan for the cost of administering continuation coverage. It is capped by law; the plan cannot charge more. There is one exception to the 102 percent ceiling: if you qualify for the 11-month disability extension of COBRA, the plan may charge up to 150 percent of the premium during those extra months. That extension is available when the Social Security Administration determines you were disabled at the time of the qualifying event or within the first 60 days of COBRA coverage.
COBRA generally lasts 18 months after a job loss or reduction in hours. Certain second qualifying events, like divorce or a dependent child aging out during the coverage period, can extend coverage to 36 months for affected family members. The clock starts at the qualifying event, not when you elect coverage, so delays eat into your total months.
The payment calendar is unforgiving
COBRA’s deadlines are strict, and missing one can end your coverage permanently. You have 60 days from the later of your loss of coverage or the date you receive the election notice to elect COBRA. After electing, you have 45 days to make your first premium payment, which must cover all the way back to the date your coverage would otherwise have ended. That first payment is often the painful one: elect on day 55 and you owe nearly two months of premiums at once.
After that, each monthly payment has a 30-day grace period, but plans are not required to be generous about it. If your payment arrives on day 31, the plan can terminate your coverage retroactively to the end of the last paid month. Set up automatic payments if the plan allows it, or calendar every due date. People lose COBRA over a forgotten $800 check more often than over anything else.
When COBRA is actually the right call
Despite the price, COBRA makes sense in specific situations. If you have already met most of your deductible for the year, switching to a new plan resets that progress to zero, and staying on COBRA preserves it. If you are mid-treatment with specialists who are in your employer’s network, COBRA avoids disrupting care. If you expect to be rehired or to land a new job with benefits within a few months, paying for a short bridge can be simpler than enrolling elsewhere. And in rare cases involving very expensive employer plans in cheap marketplace regions, COBRA can even price competitively, though that is unusual.
For most people, though, the marketplace wins on price. A subsidized marketplace plan frequently costs a fraction of COBRA, and job loss triggers a special enrollment period. Our comparison of COBRA, marketplace, and Medicaid after a job loss runs the numbers side by side, and our ranking of every COBRA alternative by cost covers the rest of the field, including spouse plans and Medicaid.
Details people miss
A few fine points that cause real problems. You can change your COBRA elections during your former employer’s open enrollment, just like active employees can; you are not locked into the plan you had when you left. Each qualified beneficiary has an independent right to elect, so a spouse can take COBRA even if you do not. COBRA does not apply to employers with fewer than 20 employees, though many states have mini-COBRA laws covering smaller firms. And COBRA premiums are generally not subsidized; the pandemic-era federal COBRA subsidy expired long ago, so assume you are paying the full 102 percent.
For the broader picture of how COBRA works beyond the cost, see what COBRA insurance is and when it is worth the cost. The short version: it is expensive because it is the true price of your old plan, and it is worth it exactly when continuity of that specific plan matters more than the premium difference.
