COBRA Insurance Explained: Is It Worth the Cost?

Losing job-based health insurance is stressful. COBRA gives you a familiar option — keep the same coverage you had — but the price tag shocks most people. Understanding your alternatives helps you make the right call quickly.

How COBRA works

The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires most employers with 20+ employees to offer continuation coverage to employees (and their covered dependents) who lose health benefits due to a "qualifying event."

Qualifying events that trigger COBRA eligibility:

• Voluntary or involuntary job loss (including layoffs and firing, except for gross misconduct)
• Reduction in hours that causes loss of coverage
• Divorce or legal separation from covered employee
• Covered employee becoming eligible for Medicare
• Dependent child aging off coverage
• Death of covered employee (for dependents)

Your employer must notify you of COBRA rights within 14 days of the qualifying event. You then have 60 days to elect COBRA coverage. Coverage is retroactive — if you have a claim during those 60 days and then elect COBRA, the claim is covered.

How much COBRA costs

This is the sticker shock. While employed, most workers pay 20–30% of the health insurance premium. On COBRA, you pay:

Full employer contribution + your contribution + 2% administrative fee

Example:

• Total monthly premium while employed: $700 (employer paid $500, you paid $200)
• COBRA cost: $700 + 2% = $714/month

National averages for COBRA in 2026:

• Individual coverage: $600–$750/month
• Family coverage: $1,700–$2,100/month

COBRA vs. ACA Marketplace: how to decide

Choose COBRA if:

• You're in active treatment or have upcoming procedures with your current network
• Your income is too high for ACA subsidies and COBRA premium is competitive
• You plan to re-enroll in employer coverage within 1–3 months (new job, spouse's plan open enrollment)
• You have an HDHP + HSA and want to preserve your deductible progress for the year

Choose the marketplace if:

• You qualify for premium tax credits (income under 400% FPL, or under the amount where marketplace costs ≤8.5% of income)
• You're not in active medical treatment and can switch providers
• You're unemployed and income will be low — Medicaid may be available for free

The key calculation: Compare COBRA premium vs. marketplace Silver plan after subsidies. For most people who've lost jobs with reduced income, the marketplace is substantially cheaper.

The COBRA election period strategy

You don't have to elect COBRA immediately. You have 60 days to decide — and coverage is retroactive to the day you lost employer coverage.

The 60-day wait strategy: If you're healthy and don't expect any medical expenses, you can wait 60 days before deciding. If you have a claim during that period, elect COBRA within 60 days and the claim is covered retroactively. If you stay healthy, let the deadline pass and enroll in the marketplace instead (losing job-based coverage triggers a 60-day Special Enrollment Period).

Important: This strategy works but carries risk. If you have a major medical event, you may have trouble paying the back-premium owed on COBRA. Only use this strategy if you're in good health with no anticipated medical expenses.

Frequently Asked Questions

How much does COBRA insurance cost? COBRA costs the full premium your employer previously paid plus a 2% administrative fee. Most employees only paid 20–30% of the premium while employed; on COBRA you pay 100% plus 2%. The average COBRA cost is $600–$700/month for an individual and $1,800–$2,000/month for a family in 2026.

How long can you stay on COBRA? COBRA continuation coverage lasts up to 18 months in most situations. It extends to 29 months if you or a covered dependent are disabled at the time of the qualifying event (job loss, etc.). In some cases (divorce, death of covered employee, dependent aging off), coverage can continue for 36 months.

Is COBRA better than marketplace insurance? It depends on your income and health needs. COBRA keeps your current doctors and network, which matters if you're mid-treatment or have a specialist relationship. But COBRA is expensive — many people qualify for marketplace plans that cost significantly less after premium tax credits. Compare both options before deciding.