If you were getting health insurance through work, leaving your job means losing your employee coverage. The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 created a way for former employees to temporarily keep their health insurance benefits. This law applies to employers with 20 or more employees.
Your COBRA continuation insurance cost could end up substantially higher than what you were paying as an employee, though. To help you figure out your next move for health insurance, here’s a look at what COBRA typically costs as well as other options for coverage.
What Is COBRA Insurance?
COBRA insurance is a way to temporarily maintain the same group health insurance plan you were on as an employee. It’s a safeguard against going without health insurance after leaving a job.
Employers with at least 20 employees for more than half the year are required to offer COBRA coverage. There are only a few exceptions, including insurance plans offered by churches, the federal government, and certain church-related organizations. If your employer offers COBRA, you are eligible to join if you lose your group health insurance for the following reasons:
- You quit.
- Your employer lets you go (unless it’s for gross misconduct).
- Your employer cuts your hours so you are no longer eligible for employee health insurance.
- Your spouse loses their group health insurance because they are fired, quit, or become eligible for Medicare.
- You get divorced and were using your former spouse’s work health insurance.
- Your spouse dies and you were using their work health insurance.
- You turn 26 and age out of your parent’s group health insurance plan.
COBRA insurance is temporary health insurance, and the amount of time you can keep the coverage depends on certain factors:
- If you lose your job or quit, coverage lasts up to 18 months.
- If the Social Security Administration determines you are disabled after you leave your job, COBRA coverage can last up to 29 months.
- If you lose coverage because your covered spouse dies or loses coverage from joining Medicare, or if you get divorced or separated, you and your dependent children are eligible for COBRA for up to 36 months.
- Children who lose other coverage because they turn 26 are eligible for COBRA coverage for up to 36 months.
Some states have COBRA-type laws in place for companies with fewer than 20 employees.
How to Get Cobra Insurance
If you meet one of the qualifying conditions for COBRA, your employer’s HR department will send you an enrollment letter. This letter tells you how to rejoin the plan and pay your first premium. You have 60 days from the qualifying event that caused you to lose group coverage or the date your notice was mailed, whichever is later, to join COBRA.
COBRA coverage is retroactive. Technically, it starts the day you lost group insurance coverage, even if you sign up after that date but within the 60-day window. In other words, you’ll owe premiums going back to the day you lost coverage no matter when you sign up for it. COBRA will also pay any healthcare bills you had during this period, even if you decide to join later (but within the 60-day window).
Before enrolling, make sure you’ve compared the COBRA health insurance cost against the best health insurance companies for the unemployed.
Cobra Insurance Cost
In general, when you get health insurance through your job, your employer pays a portion of the premium. You should expect COBRA insurance costs to be substantially higher than what you paid as an employee because your employer is no longer required to pay a share.
In 2022, employees paid an average of $111 per month for an individual plan and $509 per month for a family plan, according to KFF. However, that represents just a small portion of the entire cost. The total average annual cost for employer-sponsored insurance for single coverage was $7,911 for all plan types, or $659 per month. For family coverage it was $22,463, or $1,872 per month. That includes both the employee’s and the employer’s share of costs. When on COBRA, you’re responsible for the entire cost of your coverage, plus an administrative fee.
Consider the following to estimate how much COBRA insurance will cost you:
- Your share of the premium: Whatever you were paying per month for coverage as an employee, you will have to pay for COBRA insurance, plus the following amounts.
- Your employer’s share: While your employer may continue to offer some support, it’s also quite likely you will need to pay for everything that was previously covered.
- An administrative fee: Your employer is allowed to add another 2% to the premium cost to cover their administrative costs for keeping you on the plan.
If you quit a job where you were paying the national average for health insurance, your premium could go up to $673 per month for individual coverage or $1,909 per month for a family plan (with a 2% administrative fee tacked on).
Key Factors Influencing COBRA Insurance Costs
Health Plan Type
The type of group coverage you were receiving from your employer influences the cost of COBRA insurance. A family plan costs significantly more on average than an individual plan.
In addition, the cost depends on your provider network. For example, if yours is an HMO plan, it will be cheaper than a PPO plan.
If your group health insurance plan covers most out-of-pocket expenses and has a low deductible, it will cost more than a plan with higher out-of-pocket costs. On the other hand, a high-deductible health plan (HDHP) charges a lower premium: about $200 less per month for a family plan versus a PPO in 2022. (Note that the HDHP is still a very expensive plan with COBRA: It cost $21,136 on average for family coverage in 2022.)
To reduce your COBRA insurance cost per month, one option is to see whether your employer offers other lower-cost plan options with a lower coverage level. This tradeoff could make sense if you’re healthy.
You can’t switch plans immediately after losing your job. However, you can switch your COBRA plan during your previous employer’s next open enrollment period (even though you’re no longer employed at that company).
Employers do not have to cover any of your COBRA premiums, but some choose to. Ask your HR department if the company pays a portion of COBRA and, if so, how much.
The cost of health insurance changes significantly depending on where you live. In 2021, the average premium for individual coverage on a workplace plan ranged from $6,340 per year in Arkansas to $9,037 per year in Alaska. States with pricier health insurance premiums will have pricier COBRA premiums.
Typically, premium payments deducted from your paycheck are pre-tax payments—what you pay toward your premiums doesn’t count as income when you file your taxes. With COBRA, you need to pay the premiums with after-tax funds. As a result, your tax bill could increase since the money you’re using to pay your premiums is (now) considered income.
There is a deduction for health insurance premiums outside of work, but it’s not something everyone can claim. You can only deduct healthcare spending, including COBRA premiums, that exceeds 7.5% of your adjusted gross income (AGI) and you need to itemize deductions. If you don’t itemize or if your qualified healthcare expenses don’t exceed 7.5% of your AGI, you can’t deduct COBRA premiums.
Plus, you’ll most benefit from the deduction if you have very large healthcare expenses. For example, if your AGI is $100,000 and your healthcare spending is $8,000, you could only deduct $500.
Alternatives to Cobra Insurance
COBRA insurance is not the only way to keep healthcare coverage after leaving a job. Before enrolling, make sure to consider these alternatives, especially if you are concerned about the cost of COBRA insurance.
Marketplace Plans and Special Enrollment
Marketplace plans are private health insurance plans launched under the Affordable Care Act (ACA, also known as Obamacare). You can visit your state’s exchange or the federal health insurance Marketplace to compare health insurance plans in your area.
Losing your job-based coverage is considered a qualifying event for special enrollment, meaning you can enroll without waiting for the annual open enrollment period (November 1 to January 15). You have 60 days from the day you lost your workplace coverage to enroll in a Marketplace plan. However, you could experience a gap in coverage as Marketplace coverage won’t start, at the earliest, until the month after you lose your employer-sponsored insurance.
Marketplace plans are significantly cheaper than COBRA coverage—the average cost is $456 per month, but could be less if you get a bronze ($342 per month, on average) or silver plan ($448 per month). It’s also likely you’ll qualify for a tax subsidy to help pay for coverage. In 2022, 89% of Marketplace enrollees saw their premiums reduced with advanced premium tax credits.
Your Spouse’s Workplace Plan
If your partner has a workplace health insurance plan, check with their HR department to see if spouses are covered. Losing your workplace coverage should qualify you for a special enrollment period to join. This applies even if they aren’t currently enrolled in a health insurance plan at work.
Medicaid is a state-run health insurance program. In most states, you qualify if your household income is below 138% of the federal poverty line, which is $20,120 for a single person and $41,400 for a family of four in 2022. But some states have other requirements. For example, Florida does not cover non-disabled adults under the age of 65 who don’t have dependents, regardless of their income.
Most state Medicaid programs do not charge a monthly premium.
Short-Term Health Insurance
If you think you’ll get another job with health insurance soon, another option is to buy short-term health insurance. Like the name says, these plans are temporary. The longest a short-term plan may last is up to 364 days (without renewing it), but some states like Delaware limit coverage to just a few months.
Short-term health insurance plans may charge a much lower premium than what you would pay for COBRA. However, these plans rarely provide the same level of coverage and can refuse to provide coverage for pre-existing conditions.
If you earn too much to qualify for Medicaid, the Children’s Health Insurance Program (CHIP) may be an option if you have children (and allows for higher levels of income). Your state may also run its own health insurance programs for those who cannot afford private insurance through COBRA or the ACA Marketplace. Check with your state’s government website.
If you choose one of these options instead of COBRA, you won’t be able to change your mind once the 60-day window has passed.
Best Health Insurance Companies
Consider these options from our review of the best health insurance companies.
Best for the Most Options: Blue Cross Blue Shield
Blue Cross Blue Shield provides a variety of affordable health insurance plans of all types, costs, and coverage levels. It is available nationwide and has a relatively high rating from the National Committee for Quality Assurance (NCQA). Blue Cross Blue Shield also offers 24/7 $0 virtual care in some states.
Best Value Plans: Oscar
Based on our research, Oscar offered the lowest-cost Marketplace plans across all age groups. Many plans have low out-of-pocket costs and $0 co-pays for virtual care. However, Oscar is not available nationwide and has poor member experience ratings.
Highest Quality Plans: Kaiser Permanente
In our analysis of the best health insurance companies, Kaiser Permanente received the highest scores for customer satisfaction as well as the highest ratings from third parties. It also receives far fewer complaints than expected for an insurer its size, according to the National Association of Insurance Commissioners (NAIC). Unfortunately, Kaiser Permanente is only available in eight states and the District of Columbia. If you live in its coverage area, it’s worth considering.
Best for Quick Care: Aetna CVS Health
If you want quick, convenient access to medical care, consider Aetna CVS Health. Through its plans, you can go to a MinuteClinic at CVS pharmacies seven days a week for same-day care. There is little to no out-of-pocket cost for using these clinics. However, our research showed that plan premiums can be higher than average.
Best Medicare Advantage Plans: UnitedHealthcare
As the largest provider of Medicare Advantage plans, you can probably find a UnitedHealthcare plan in your area (if you’re eligible for Medicare when you lose your job). UnitedHealthcare has an expansive provider network and $0 copays, and many plans earn a high Medicare star rating from the CMS.
How Does COBRA Insurance Work If I Quit My Job?
If you quit your job, you are allowed to temporarily extend your workplace health insurance through COBRA. Once you quit, you have a 60-day window to decide if you want to sign up for COBRA. If you decide COBRA is too expensive, consider a Marketplace health insurance plan for your coverage needs.
How Long Does COBRA Insurance Last?
COBRA insurance lasts between 18 to 36 months, depending on the reason you lost your group health insurance. It lasts up to 18 months if you quit your job, are fired, or lose access to health insurance because your hours are cut. If you’re disabled, you can extend coverage via COBRA up to 29 months. In some cases, spouses and dependent children can receive COBRA for up to 36 months. But many people will qualify for a Marketplace health insurance plan before their eligibility for COBRA expires.
How Do You Cancel COBRA Insurance?
You can cancel COBRA insurance anytime you want. It’s a month-to-month insurance plan. Just let your employer’s insurance company know you no longer want to keep coverage. If you cancel, you won’t be able to rejoin the COBRA insurance plan later. So make sure you have other health insurance coverage lined up.