COBRA vs Marketplace After Layoff: How to Choose
Losing job-based health insurance is one of the most stressful parts of a layoff. You usually have a few options — COBRA, an ACA Marketplace plan, Medicaid, or joining a spouse's plan — and the right choice depends on cost, the doctors and medications you need to keep, and how long you expect to be between jobs. Here's how to think it through.
What is COBRA?
COBRA lets you keep your exact employer health plan after you lose your job, for up to 18 months. The catch: you pay the full premium (the part your employer used to cover, plus your share) plus up to a 2% administrative fee. That often lands between $600 and $2,000+ a month. The upside is total continuity — same plan, same doctors, same network, and the deductible you've already paid this year carries over.
What is Marketplace insurance?
ACA Marketplace plans (Healthcare.gov or your state exchange) are individual plans sold in metal tiers (Bronze, Silver, Gold). Prices are based on your income, so most people who recently lost income qualify for premium tax credits that lower the monthly cost — often well below COBRA. You choose a new plan, which means the network and drug formulary may differ from your old coverage.
How job loss creates a special enrollment period
Losing job-based coverage is a qualifying life event. It opens a special enrollment period — typically 60 days from when your coverage ends — during which you can enroll in a Marketplace plan outside the normal open-enrollment window. Miss it and you may have to wait, so note the date.
How an income drop can affect subsidies
Marketplace subsidies are based on your expected annual income for the coverage year. A layoff usually lowers that number, which increases your subsidy and lowers your premium. But be careful: taxable severance counts as income, and a big lump sum can shrink your subsidy. Estimate your realistic full-year income honestly, and update the Marketplace if it changes.
COBRA vs Marketplace cost comparison
Compare totals, not just month one. If your employer subsidizes COBRA for a few months, COBRA can be cheapest early — then the cost jumps when the subsidy ends. The calculator above models that cliff, shows your break-even month, and totals the cost over the number of months you expect to be uninsured through your old employer.
Doctor network and prescriptions
Cost isn't everything. If you're in active treatment, see specific specialists, or take medications that must be covered, a cheaper Marketplace plan can cost you more if a provider is out-of-network or a drug is off-formulary. Check each doctor and prescription against any new plan before switching.
Family coverage considerations
You can often mix and match — for example, put the kids on CHIP or Medicaid while an adult takes a Marketplace plan. Enter the family members needing coverage so you can weigh whether covering everyone on one plan or splitting coverage is cheaper.
COBRA subsidy from a severance package
Some severance packages include several months of paid or subsidized COBRA. That can make COBRA the clear winner while it lasts. Confirm exactly how many months are covered and what you'll pay afterward — then plan your switch to a Marketplace plan around the cliff if needed. See the Severance Package Checker to confirm what your offer includes.
What if you expect another job soon?
If you expect to start a new job (with benefits) within a couple of months, a short stretch of COBRA can be simplest — no new plan, no deductible reset. If the gap is longer or uncertain, a subsidized Marketplace plan usually wins on cost.
Medicaid and spouse plan options
Don't overlook the two options people forget: Medicaid (if your income is now low, it can be $0–low premium, with no enrollment deadline) and joining a spouse or partner's employer plan (losing coverage is usually a qualifying event to enroll, often within 30 days). Either can beat both COBRA and Marketplace.
Mistakes to avoid
- Auto-electing COBRA without pricing a subsidized Marketplace plan first.
- Forgetting that a big severance lump sum can reduce your subsidy.
- Switching plans mid-treatment without checking network and formulary.
- Missing the ~60-day enrollment and COBRA election deadlines.
- Not checking Medicaid/CHIP or a spouse's plan.
