What COBRA Actually Costs After Leaving a Job

COBRA lets you keep your employer health plan after leaving a job. The coverage is identical — same network, same deductible, same accumulated spending toward it. The price is not.

For most people the first COBRA quote is a shock, and the shock is informative: it is the first time they have seen what their health coverage actually cost.

Why the number is so large

An employer typically pays the majority of the premium. Employees see only their share on a payslip and reasonably conclude that is the price.

COBRA charges the full premium — your share plus the employer's — plus an administrative fee of up to 2%. So the increase from what you were paying is not marginal. It is frequently several times the payslip figure, and for family coverage it can exceed a mortgage payment.

Nothing about the coverage got worse and nothing was marked up beyond that small administrative fee. The subsidy simply stopped.

The COBRA cost calculator works out the monthly figure from the plan's total premium, which appears on your benefits statement or can be requested from HR.

The deadlines, and the retroactive window

The timing rules are unusually generous and worth understanding precisely, because they enable a strategy that is not obvious.

You have 60 days from the later of your coverage ending or receiving the election notice to elect. Then a further period — generally 45 days from election — to make the first payment.

Critically, coverage is retroactive to the day your old plan ended. There is no gap.

That combination creates a genuinely useful option: you can decline to elect, wait, and if a medical event occurs during the election window, elect then and have it covered retroactively. You have effectively free contingent coverage for that period.

The risk is real but bounded — you owe all the back premiums if you elect. For a healthy person bridging a short gap to a new job, waiting is often the rational choice rather than paying immediately.

Duration is generally 18 months, extended in certain circumstances such as disability or a second qualifying event.

When COBRA is the right answer

Despite the price, several situations make it clearly correct.

You have met your deductible or out-of-pocket maximum. This is the strongest reason. Switching plans mid-year resets both to zero. Someone who has already spent heavily may find COBRA cheaper overall than a lower-premium plan that restarts the clock — the out-of-pocket maximum guide covers why that reset is so expensive.

You are mid-treatment. Continuity of provider and authorised treatment plan is worth a great deal, and a new insurer may not cover the same specialists or may require fresh prior authorisation.

The gap is short. A few weeks before new coverage begins, particularly using the retroactive election window above.

Your household has complex needs that the current network handles well.

Severance includes subsidised COBRA. Some packages cover it for a period, which removes the cost objection entirely — check the severance calculator for how that fits the wider package.

When the marketplace wins

For a longer gap, marketplace coverage usually costs far less, and one feature dominates.

Premium credits are income-tested. Someone who has just stopped working may have a low income for the year, which can produce substantial subsidies. COBRA has no equivalent — you pay the full price regardless of income.

That makes the comparison lopsided in exactly the circumstance people most often face: loss of employment. Yet many people elect COBRA without checking marketplace pricing, because COBRA arrives in the post as a form and the marketplace requires going and looking.

Two timing details matter.

Losing employer coverage is a qualifying life event, opening a special enrolment period of 60 days. That window runs concurrently with the COBRA election window, so compare both before either expires.

Voluntarily dropping COBRA later is not a qualifying event. Exhausting it is; ending it early is not. So electing COBRA and then trying to switch mid-year usually means waiting for open enrolment. Choose deliberately at the start rather than assuming you can move later.

Other alternatives worth checking: a spouse's employer plan (their coverage change is also a qualifying event, and this is frequently the cheapest option by far), and for some households, coverage through a professional association.

Reading the whole picture

A few points that change the calculation.

Estimate your income for the full year honestly. Marketplace subsidies are reconciled at filing, so an underestimate creates a repayment. A severance payment or a final bonus counts, which can reduce subsidies more than expected.

Watch the interaction with retirement withdrawals. If you are retiring rather than job-hunting, which accounts you draw from directly affects your reported income and therefore your premium. Drawing from taxable savings and Roth accounts keeps income low; traditional withdrawals do not. The withdrawal sequencing guide covers the lever, and the retirement healthcare cost guide covers the whole bridge to Medicare.

HSA contributions can continue if you remain on a qualifying high-deductible plan, including through COBRA. And HSA funds can pay COBRA premiums tax-free — one of the few situations where insurance premiums are a qualifying HSA expense, which the HSA guide covers.

Do not go uninsured to save money. The premium is painful and the alternative is unbounded. A single unexpected event costs multiples of any premium saved, and the emergency fund calculator assumes a cap on the downside that being uninsured removes.