COBRA vs ACA Marketplace: Which Is Right After Leaving Your Job?
A complete comparison of costs, coverage, and when each option makes financial sense for your situation.
Key Takeaways
- 1COBRA continues your exact employer coverage but you pay the full premium (often $600-$2,000+/month).
- 2ACA marketplace plans may offer subsidies if your income qualifies, potentially costing $0-$500/month.
- 3COBRA has no income requirements; ACA subsidies phase out above 400% of federal poverty level.
- 4You have 60 days to elect COBRA after losing coverage, and it can be retroactive.
- 5Losing job-based coverage is a qualifying life event for ACA special enrollment.
Understanding Your Options
When you lose employer health coverage, you have two primary paths: continue your existing plan through COBRA or purchase new coverage through the ACA marketplace (Obamacare). Both have distinct advantages and costs.
- **COBRA:** Continues your exact employer plan for up to 18 months (36 months in some cases)
- **ACA Marketplace:** New individual/family coverage with potential premium subsidies
- **You can have both options open:** You have 60 days to decide on COBRA, and a 60-day special enrollment for ACA
- **One-way door:** Once you decline COBRA, you typically cannot go back to it
Cost Comparison: The Real Numbers
The cost difference can be dramatic depending on your income level:
| Factor | COBRA | ACA Marketplace |
|---|---|---|
| Monthly Premium | Full employer cost + 2% admin fee | Varies by plan; subsidies may apply |
| Typical Cost (Individual) | $600-$800/month | $0-$500/month with subsidies |
| Typical Cost (Family) | $1,500-$2,200/month | $0-$1,000/month with subsidies |
| Subsidy Available? | No (full price only) | Yes, if income 100-400% FPL |
| Income Requirements | None - anyone can elect | Must project income for subsidy |
| 2024 FPL Reference | N/A | $14,580 individual / $30,000 family of 4 |
FPL = Federal Poverty Level. 400% FPL = ~$58,320 individual / $120,000 family of 4 for 2024
Coverage Comparison
Understanding what you get with each option:
| Coverage Aspect | COBRA | ACA Marketplace |
|---|---|---|
| Plan Options | Same plan you had (no changes) | Multiple tiers: Bronze, Silver, Gold, Platinum |
| Doctor Network | Same network as employer plan | Varies by plan; may be narrower |
| Prescription Coverage | Same as before | Varies; check formulary |
| Deductibles/Copays | Same as employer plan | Varies; Silver CSR may lower costs |
| Coverage Start | Retroactive to coverage loss | Typically 1st of following month |
| Maximum Duration | 18-36 months | No limit (annual renewal) |
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When COBRA Is the Better Choice
COBRA makes financial sense in specific situations:
- **Mid-treatment:** You're in the middle of expensive treatment and need to keep your doctors
- **High-deductible met:** You've already met your deductible for the year
- **Short gap:** You only need coverage for a few months until new employer coverage starts
- **Income too high for subsidies:** Your income exceeds 400% FPL, making ACA full-price
- **Superior plan:** Your employer plan is significantly better than available ACA options
- **Specific medications:** Your prescriptions are covered by employer plan but not ACA formularies
When ACA Marketplace Is the Better Choice
The ACA marketplace typically wins when:
- **Subsidy-eligible income:** Your projected annual income qualifies for premium tax credits
- **Early retirement:** You need long-term coverage (COBRA maxes out at 18 months)
- **Cost is priority:** Even unsubsidized ACA may be cheaper than COBRA
- **Flexibility needed:** You want to choose from multiple plan options and networks
- **Starting fresh:** You don't have ongoing treatment requiring specific providers
- **Income control:** You can manage MAGI to maximize subsidies (retirees with investment income)
Decision Framework: 5 Questions to Ask
Use this framework to make your decision:
- 1**What's my projected income this year?** If under 400% FPL, check ACA subsidies first.
- 2**Am I mid-treatment?** If yes, calculate cost of switching doctors vs. COBRA premium.
- 3**Have I met my deductible?** If yes, COBRA may save money for remainder of year.
- 4**How long do I need coverage?** If over 18 months, ACA is your only option anyway.
- 5**What are my prescription needs?** Compare formularies before switching.
Run the Numbers
Use healthcare.gov to preview ACA costs based on your projected income. Compare to your COBRA notice premium to make an informed decision.
Critical Deadlines You Cannot Miss
You have 60 days from losing coverage to elect COBRA and 60 days for ACA special enrollment. Missing these deadlines means waiting until Open Enrollment (November) for ACA coverage. COBRA election can be retroactive, so you can wait and see if you need it.
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- Gold IRA assets can be used for healthcare costs if needed
- Physical gold hedges against healthcare inflation (historically 5-7% annually)
- Diversifying into gold protects purchasing power for rising medical costs
- Gold holds value while healthcare expenses continue climbing
- Preserve wealth to cover the healthcare gap before Medicare at 65
Frequently Asked Questions
1Can I switch from COBRA to ACA marketplace later?
It's complicated. Voluntarily dropping COBRA is generally NOT a qualifying life event for ACA special enrollment. You'd have to wait until Open Enrollment. However, if your COBRA coverage exhausts (hits 18-month limit), that IS a qualifying event. Plan your timing carefully.
2What if I elect COBRA but then find a job with benefits?
You can cancel COBRA anytime - there's no penalty. You simply stop paying premiums and coverage ends. Your new employer coverage will take over. You don't need to continue COBRA once you have other coverage.
3Do ACA subsidies count COBRA as income?
No. ACA subsidies are based on your Modified Adjusted Gross Income (MAGI), which doesn't include COBRA payments. However, if your employer provides a COBRA subsidy (as some did during COVID), that employer contribution could affect things.
4What about short-term health insurance as an alternative?
Short-term plans are cheaper but offer limited coverage: they can exclude pre-existing conditions, don't cover essential health benefits, and may have lifetime caps. They're a gamble that works only if you stay healthy. Not recommended for most people.
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