COBRA vs. Marketplace Insurance: Which Is Actually Cheaper?
When you lose employer health insurance, you have two main options: continue your old plan through COBRA or buy insurance through the Health Insurance Marketplace (healthcare.gov or your state's exchange).
Most people assume COBRA is too expensive and skip straight to Marketplace. Sometimes that's correct. Sometimes it's not. The only way to know is to compare actual costs for your specific situation.
Today you look up both options, compare the real numbers, and decide which makes financial sense. Not which sounds better in theory. Which costs less for the coverage you actually need.
Why This Comparison Matters Now
You might be on COBRA because it was the fastest option when you lost your job. Or you might have enrolled in Marketplace insurance without checking if COBRA would be cheaper.
COBRA lets you keep your former employer's insurance, but you pay the full premium (what you paid plus what your employer paid). This sounds expensive - and often is. But not always.
Marketplace plans base premiums on your income. If you're unemployed or earning significantly less, you might qualify for subsidies that make Marketplace plans cheap or even free. But if your household income is still relatively high (spouse working, severance pay, unemployment benefits counting as income), subsidies might be minimal or nonexistent.
The "right" choice depends entirely on your numbers: your income, your household size, your health needs, and the specific plans available where you live.
Find Your COBRA Cost
If you received a COBRA enrollment packet when you left your job, pull it out. It lists the monthly premium for continuing your coverage.
If you don't have the packet: Contact your former employer's HR department or benefits administrator. Ask: "What's the monthly COBRA premium for my previous health insurance coverage?"
They're required to provide this information.
Write down:
- COBRA monthly premium: $______
- Plan deductible: $______
- Plan out-of-pocket maximum: $______
COBRA coverage starts from your last day of employment if you enroll within 60 days of losing coverage. You can backdate coverage and premiums, meaning you're technically covered during the decision period even if you haven't enrolled yet.
Find Your Marketplace Options
Go to healthcare.gov (or your state's health exchange if your state runs its own - California, New York, Massachusetts, Colorado, and several others have state exchanges).
You'll need:
- Current household income estimate (include unemployment benefits if you're receiving them, severance if it's ongoing, spouse's income if applicable)
- Household size (yourself, spouse, dependents)
- ZIP code
Enter this information to see available plans.
The Marketplace will show:
- Your estimated subsidy (if any) based on income
- Monthly premiums after subsidy
- Plan deductibles
- Out-of-pocket maximums
Write down costs for 2-3 plans that match your coverage needs:
Plan 1: $______ monthly premium (after subsidy) | $______ deductible | $______ out-of-pocket max
Plan 2: $______ monthly premium (after subsidy) | $______ deductible | $______ out-of-pocket max
Plan 3: $______ monthly premium (after subsidy) | $______ deductible | $______ out-of-pocket max
Compare Total Potential Costs
Don't just compare monthly premiums. Compare what you might actually pay if you use healthcare.
For each option, calculate:
Scenario 1: Minimal healthcare use (only preventive care, no major issues) Cost = Monthly premium × 12 months
Scenario 2: Moderate healthcare use (few doctor visits, some prescriptions) Cost = (Monthly premium × 12) + Estimated out-of-pocket costs
Scenario 3: High healthcare use (surgery, major medical event, chronic condition) Cost = (Monthly premium × 12) + Out-of-pocket maximum
Example comparison:
COBRA:
- Scenario 1: $800/month × 12 = $9,600
- Scenario 2: $9,600 + $2,000 = $11,600
- Scenario 3: $9,600 + $5,000 (OOP max) = $14,600
Marketplace Silver Plan:
- Scenario 1: $350/month × 12 = $4,200
- Scenario 2: $4,200 + $3,500 = $7,700
- Scenario 3: $4,200 + $7,500 (OOP max) = $11,700
In this example, Marketplace is cheaper in all scenarios even though the out-of-pocket maximum is higher.
Consider These Factors Beyond Cost
Provider network: Does the Marketplace plan include your current doctors? If you're in ongoing treatment, staying with your providers might matter enough to justify higher COBRA costs.
Check: Enter your doctors' names on the Marketplace plan's provider search tool. If they're not in-network, you'll pay significantly more or need to switch providers.
Prescription coverage: If you take regular medications, check whether they're covered under Marketplace plans. Use the plan's formulary tool to verify.
Continuity during treatment: If you're currently receiving treatment for a serious condition, switching plans mid-treatment can be disruptive. COBRA might be worth the extra cost for a few months to complete treatment.
How long you'll need coverage: If you expect to be unemployed for 2-3 months, different math applies than if you expect 8-12 months of unemployment.
COBRA is available for 18 months after job loss. If you think you'll be employed again quickly, short-term higher costs might be manageable. If unemployment will be extended, lower monthly Marketplace premiums matter more.
Special Enrollment Period
Losing employer coverage qualifies you for Special Enrollment in the Marketplace outside the normal annual enrollment period.
You have 60 days from losing coverage to enroll. Don't wait. If you miss this window, you won't have another chance until the next annual enrollment period (November-January for most states).
If you're currently on COBRA but discover Marketplace is cheaper, you can switch during Marketplace Open Enrollment or if you have another qualifying life event.
Make Your Decision
Based on your comparison:
Choose COBRA if:
- Marketplace premiums are similar after subsidy and you prefer your current coverage
- Your doctors aren't in any Marketplace plan networks
- You're mid-treatment and changing plans would disrupt care
- You'll likely be employed again within 2-3 months
Choose Marketplace if:
- Subsidies make it significantly cheaper than COBRA
- Marketplace plans include your providers
- You expect extended unemployment
- You need to minimize monthly expenses
There's no universally "right" answer. It depends on your specific numbers and situation.
Enroll in Your Chosen Option
If choosing COBRA: Return the enrollment form within 60 days of receiving it. You'll owe back-premiums from your last day of employment, but you'll have continuous coverage.
If choosing Marketplace: Complete enrollment at healthcare.gov (or your state exchange) within 60 days of losing employer coverage. Coverage typically starts the first of the month after you enroll.
If you're unsure: You can enroll in COBRA and switch to Marketplace during the next Open Enrollment period. You can't easily do the reverse - once you decline COBRA, you can't re-enroll later.
Don't Skip Coverage to Save Money
Going without health insurance feels like an easy way to cut expenses. It's not.
One emergency room visit can cost $3,000-$10,000. One surgery can cost $20,000-$50,000. Medical debt is one of the leading causes of bankruptcy.
Even if money is extremely tight, find some coverage. A high-deductible Marketplace plan with low premiums (or potentially $0 premium if your income qualifies) provides catastrophic protection.
Complete This Comparison Today
Pull up your COBRA information. Go to healthcare.gov and enter your information. Write down the actual costs for both options.
Calculate the scenarios. Check provider networks if that matters to you. Make a decision.
Then enroll. Don't put this off because you're busy with job searching or because thinking about healthcare is overwhelming. Having no coverage or paying more than necessary for coverage you have both cost you money you can't afford to waste.
Thirty minutes of comparison today saves potentially thousands of dollars over the coming months.
