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COBRA lets you keep your employer health plan after you leave a job, which sounds generous until you see the price. You pay the full premium, including the share your employer used to cover, plus a small administrative fee. For many people it is the most expensive coverage option available, and for some people it is still the right one.
What COBRA is
COBRA is a federal law that gives workers and their families the right to continue group health coverage after a qualifying event: leaving a job voluntarily or involuntarily, having hours reduced, or, for dependents, events like divorce or the death of the covered employee. It applies to employers with 20 or more employees. Many states have mini-COBRA laws for smaller employers.
The coverage itself is identical to what you had as an employee. Same plan, same network, same deductible and out-of-pocket maximum. What changes is who pays. As an employee you paid part of the premium and your employer paid the rest. On COBRA you pay all of it, plus up to a 2 percent administrative charge.
Why it costs so much
Most employees have no idea what their insurance actually costs, because the employer’s share never appears on their pay stub as a cost. It is common for the employer to cover half or more of the premium. When that subsidy disappears overnight, the sticker shock is real. The monthly COBRA bill is often several times what you were paying as an employee, for exactly the same coverage.
This is not a markup or a penalty. It is the true price of the plan, revealed all at once. Understanding that helps with the comparison: COBRA is expensive because employer health insurance is expensive, not because COBRA adds a surcharge.
How long it lasts
COBRA coverage typically lasts 18 months after the qualifying event. Certain events, like disability or a second qualifying event, can extend it to 29 or 36 months. When it ends, it ends. There is no renewal, and you will need other coverage lined up.
When COBRA is worth it
COBRA makes sense in a few specific situations. If you are in the middle of treatment with specialists you trust, keeping the exact same plan avoids disrupting care and restarts none of your progress toward the deductible or out-of-pocket maximum. If you have already paid a large share of this year’s deductible, switching plans means starting over at zero, which can make COBRA cheaper in total even with the high premium.
It also makes sense as a bridge. If your new job’s coverage starts in two months, COBRA covers the gap with zero change to your care. And in a useful quirk, you generally have 60 days to elect COBRA after leaving, and the election is retroactive. Some people wait out the 60 days uninsured, then elect COBRA retroactively only if something happens. That is a gamble, but it is a legal one, and it means you do not pay premiums for months you did not need.
COBRA can also be the right call if you do not qualify for marketplace subsidies and the unsubsidized marketplace plans in your area are similarly priced. In that case you are paying full price either way, and COBRA lets you keep your doctors.
When it is not worth it
For most people, most of the time, the marketplace is cheaper. If your income qualifies you for premium tax credits, a marketplace plan can cost a fraction of COBRA per month. Losing job-based coverage triggers a special enrollment period, so you do not have to wait for open enrollment. Before electing COBRA, price the marketplace with your actual income. Many people are surprised by how large the subsidy is.
COBRA is also a poor choice if you are healthy and the gap is short. A short-term plan or even a few months of careful cash-pay care can cost far less, though both carry real risks if something serious happens.
And do not elect COBRA out of inertia. The election packet arrives during a stressful time, the deadline passes quickly, and the default of doing nothing is losing the option. Make the decision actively, with marketplace prices in hand.
How to decide
Work through it in order. First, check your marketplace options with a special enrollment period and any subsidies you qualify for. Second, check when your next coverage starts, whether a new job or a spouse’s plan. Third, look at how much of this year’s deductible and out-of-pocket maximum you have already paid, because that progress has real dollar value. Fourth, consider whether you are mid-treatment with providers you need to keep.
If the gap is short and you are mid-treatment with progress toward the maximum, COBRA often wins. If the gap is long and you qualify for subsidies, the marketplace usually wins. If you are healthy and the gap is a month or two, the retroactive election window lets you keep COBRA as a free backup while you decide.
COBRA is not a good deal or a bad deal in the abstract. It is full-price continuation of a plan you already know, and its value depends entirely on your health needs, your alternatives, and how much of this year’s cost sharing you have already paid.
