COBRA vs ACA Health Insurance After Layoff: Which to Choose

One of the most stressful parts of losing a job is figuring out health insurance. You've probably heard of COBRA and the ACA marketplace—but which one should you choose?

This guide breaks down both options so you can make the right decision for your situation.

Your Options at a Glance

When you lose employer-sponsored health insurance, you typically have four options:

Let's dive deeper into the two main options.

What is COBRA?

COBRA (Consolidated Omnibus Budget Reconciliation Act) lets you continue your employer's health insurance plan after you leave.

How COBRA Works

• You keep the exact same coverage you had while employed
• You pay the full premium (what you paid + what your employer paid + 2% admin fee)
• Coverage lasts up to 18 months (36 months in some cases)
• You have 60 days to decide whether to enroll
• Coverage is retroactive to your termination date

COBRA Costs

Here's the reality check: COBRA is expensive.

Example:

• Your monthly paycheck deduction: $300
• What your employer paid: $1,200
• Total COBRA cost: ~$1,530/month (including 2% admin fee)

Most people are shocked when they see the full cost of their health insurance.

COBRA Pros

✅ Same doctors, same coverage, no changes ✅ No enrollment restrictions or waiting periods ✅ Pre-existing conditions fully covered ✅ Good for ongoing treatment with specific providers ✅ Can enroll retroactively (pay only if you need care)

COBRA Cons

❌ Extremely expensive (you pay full cost + admin fee) ❌ Limited to 18 months ❌ No subsidies available regardless of income ❌ Tied to your former employer's plan choices

What is ACA Marketplace Insurance?

The Affordable Care Act (ACA) marketplace (Healthcare.gov or your state's exchange) offers individual health insurance plans with potential subsidies based on your income.

How ACA Marketplace Works

• You choose from multiple plans at different price points
• Subsidies are available based on your income
• Losing your job qualifies you for Special Enrollment—you have 60 days to enroll
• Plans are categorized by metal tier: Bronze, Silver, Gold, Platinum

ACA Costs

Without subsidies: $300-$800+/month for an individual

With subsidies: Potentially $0-$200/month or less

The key factor is your expected income for the year. If you're unemployed, your income may be lower, making you eligible for significant subsidies.

ACA Pros

✅ Often much cheaper than COBRA (with subsidies) ✅ Multiple plan options to fit your budget ✅ Subsidies available based on income ✅ Pre-existing conditions covered ✅ Can keep coverage indefinitely (not just 18 months)

ACA Cons

❌ May need to change doctors/networks ❌ Different coverage than your employer plan ❌ Requires estimating your annual income ❌ Plan changes only during enrollment periods (or with qualifying event)

COBRA vs ACA: Head-to-Head Comparison

Which Should You Choose?

Choose COBRA If:

• You're in the middle of treatment with specific doctors
• You need continuity of care (pregnancy, ongoing conditions)
• You expect to find a new job quickly (1-3 months)
• Your spouse's employer offers better coverage soon
• Cost isn't your primary concern

Choose ACA Marketplace If:

• You want to minimize costs
• You're flexible about doctors/networks
• Your job search may take longer than a few months
• Your income qualifies you for subsidies
• You want more plan options

Consider This Strategy:

Use the 60-day COBRA window strategically:

1. Decline COBRA initially (don't pay yet)
2. Sign up for ACA marketplace coverage
3. If you have a medical emergency during the gap, you can retroactively elect COBRA

This gives you a safety net while potentially saving hundreds per month.

How to Estimate Your ACA Subsidies

Your subsidy depends on your estimated income for the year.

If you were laid off mid-year:

• Calculate your actual earnings so far
• Estimate any additional income (severance, unemployment, etc.)
• Estimate any new job income if applicable

Example:

• Earned $50,000 before layoff (Jan-June)
• Unemployment benefits: $12,000 (July-Dec)
• Total estimated income: $62,000

Use the Healthcare.gov calculator to estimate your subsidies.

Step-by-Step: Enrolling in ACA Marketplace

1. Visit Healthcare.gov (or your state's marketplace)
2. Create an account
3. Report your qualifying event (loss of job-based coverage)
4. Enter your household and income information
5. Compare plans (pay attention to networks, deductibles, premiums)
6. Select and enroll

You have 60 days from losing coverage to complete this process.

Step-by-Step: Enrolling in COBRA

1. Wait for your COBRA notice (your employer must send within 14 days)
2. Review the coverage details and cost
3. Decide within 60 days
4. Send your election form if you want coverage
5. Pay premiums (you'll owe back-premiums to your coverage start date)

Special Situations

You Have Pre-Existing Conditions

Both COBRA and ACA marketplace plans must cover pre-existing conditions. This should not affect your decision.

You're Pregnant

If you're pregnant or planning to become pregnant:

• COBRA may provide better continuity with your OB
• ACA plans also cover maternity, but you may need to change providers

You Have a Spouse

If your spouse has employer coverage, you may be able to join their plan. A spouse's job loss typically qualifies as a "life event" that allows mid-year enrollment.

What NOT to Do

❌ Don't go without coverage — One medical emergency can devastate your finances

❌ Don't miss the 60-day deadline — You'll have to wait for Open Enrollment

❌ Don't forget about dental/vision — COBRA includes these; ACA typically requires separate enrollment

❌ Don't ignore subsidies — You may qualify for more help than you expect

Making Your Decision

Run the numbers:

1. Get your COBRA cost from your employer's notice
2. Go to Healthcare.gov and get ACA quotes with subsidies
3. Compare the monthly costs
4. Consider your healthcare needs for the next 6-12 months
5. Factor in your specific doctors and prescriptions

Most people save money with ACA marketplace plans, especially if they're eligible for subsidies. But if continuity of care is critical, COBRA may be worth the extra cost.

Quick Decision Guide

Go with ACA Marketplace if:

• Your estimated annual income qualifies for subsidies
• You're flexible on doctors/networks
• You want to minimize monthly costs

Go with COBRA if:

• You need your specific doctors right now
• You're in the middle of treatment
• You expect a new job with benefits within 2-3 months

Related Resources:

• What to Do When Laid Off →
• Emergency Budget Planning →
• Filing for Unemployment →