COBRA vs ACA: Which one should I choose?
Losing or quitting your job can be stressful enough by itself. But often it also comes with the added issue of losing employer-sponsored health insurance for you and your family. You’re presented with COBRA coverage as an option, and then there’s health insurance under the Affordable Care Act.
So which one is better? Typically ACA insurance is more affordable than COBRA insurance because you can be eligible for federal ACA subsidies, depending on your income. COBRA costs an average of $599 per month. An Obamacare plan of similar quality costs $462 per month—but with the government subsidies available, the average cost of an Obamacare plan on HealthSherpa is only $47 per month.
But ultimately, it depends on your situation. If you’re not eligible for government subsidies and the costs of COBRA and ACA are similar, or if you’ve used up the deductible on your employer insurance before you leave your job, it might make sense for you to do a COBRA plan.
Grab our free guide to the differences between COBRA and ACA insurance. You can download it and refer back to it later.
What is COBRA?
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. It applies to any group health plan maintained by the state or local government or by a private company with 20+ employees. If you’re about to lose your employer-based health benefits under certain circumstances, COBRA allows you to continue being on your employer’s group health plan at your own expense. It also covers your spouse and any dependent children on your health plan.
What is ACA health insurance (aka Obamacare or Marketplace insurance)?
ACA health insurance refers to individual health insurance plans that meet the “minimum essential coverage” and other requirements of the Affordable Care Act. You can explore and enroll in ACA health insurance plans by putting in your zip code below—this tool will show you if you’re eligible for Medicaid or a subsidy on Marketplace insurance, and how much a plan would cost you.
Who can enroll in COBRA health insurance?
If your employer-sponsored health insurance plan is covered under COBRA, you’ll get COBRA insurance as an option if you quit or lose your job. You’re also eligible if your hours are reduced. If you have a spouse or dependent children on your employer-based health insurance, they’ll also be covered in those circumstances. In addition, they can also enroll in COBRA health insurance if you become entitled to Medicare, get a divorce or legal separation, or pass away.
Each qualified beneficiary is independent of others. That means each individual can make their own choices as to what sort of coverage to get under COBRA.
Who can enroll in ACA health insurance?
Nearly all Americans can enroll in ACA health insurance. The main exceptions are if you do not live in the United States, are in prison, or have Medicare coverage. Those who are not U.S. citizens or U.S. nationals can also be eligible, depending on their status.
When can I enroll in COBRA coverage?
Typically you have at least 60 days after you lose your employer-sponsored health insurance to decide whether you want to enroll in COBRA health insurance.
COBRA coverage can also be retroactive, so no need to worry about a coverage gap during that enrollment window either. If you decide to pay for COBRA coverage and pay your premiums retroactively, your coverage will also be retroactive. That means any medical bills that would have been covered during your enrollment period will be reimbursed once you’re enrolled.
When can I enroll in ACA health insurance?
If you lose your employer-sponsored insurance, you’ll have 60 days to enroll in an ACA health insurance plan.
Each year there is an Open Enrollment Period when you can enroll in ACA health insurance. Outside of the Open Enrollment Period, you are eligible for a Special Enrollment Period if you have a Qualifying Life Event such as losing a job or getting married. Typically this Special Enrollment Period is 60 days. If you miss the Special Enrollment Period after your Qualifying Life Event, you will have to wait until the next Open Enrollment Period to get health insurance.
How long does COBRA health insurance last?
How long COBRA lasts actually depends on the circumstances, but it typically ranges from 18 to 36 months. However, you have to use your COBRA coverage without interruption. So if you choose to terminate your COBRA coverage during that period, you cannot start it up again.
How much does COBRA cost?
The cost of COBRA insurance depends on the health insurance plan you had under your employer. Nothing changes with your health insurance coverage, but now you are responsible for paying the full monthly premium. In addition, you also have to pay a 2% COBRA administration fee.
COBRA costs an average of $599 per month. An Obamacare plan of similar quality costs $462 per month—but 94% of people on HealthSherpa qualify for government subsidies, bringing the average cost down to $48 per month.
How much does ACA health insurance cost?
The cost of ACA health insurance depends on the type of plan you choose. They can range from catastrophic plans with low premiums and high deductibles. All the way to gold tier plans with higher premiums and more comprehensive coverage. Before subsidies, the average lowest-cost Bronze plan in 2020 was $331 per month and the average Silver plan was $$442 per month, according to the Kaiser Family Foundation. However, after subsidies, the average person in HealthSherpa’s study paid $47 because they received a subsidy of an average of $634. Although the sticker price of Obamacare plans can be high, 94% of people received a subsidy on HealthSherpa during 2020 Open Enrollment.
Enter your zip code below to find out how much you can save:
If you need help enrolling, you can call our Consumer Advocates at (872) 228-2549.
What happens if I already have COBRA coverage – can I switch to ACA health insurance?
Yes and no. If you choose to enroll in COBRA, you can switch to ACA health insurance under the following circumstances:
- You have used up all of your COBRA coverage.
- You have another qualifying life event that makes you eligible for another Special Enrollment Period.
- It is the annual Open Enrollment Period.
You won’t be able to switch to ACA health insurance outside of those situations. So consider your circumstances before discontinuing your COBRA coverage, or you may end up without health insurance coverage.
So when it comes to COBRA vs. ACA health insurance, which one should you choose?
It depends on your individual circumstances. When weighing COBRA health insurance against ACA health insurance, consider both your financials and your health needs.
For some people, subsidies may make ACA health insurance significantly cheaper than paying for COBRA. Enrolling in ACA health insurance also allows you to pick a different health insurance plan, which can be useful if your previous employer-sponsored one is no longer the best one for your health needs. For others, enrolling in COBRA health insurance to stay on your previous plan may be the most financially sound choice and can be the easier route, especially if you expect to be on another employer-sponsored health insurance plan soon.
Make sure to explore your ACA health insurance options and find out if you qualify for a subsidy before comparing it to your COBRA health insurance option.
Lost coverage
Released from incarceration
Got married
Why does it matter if I’ll be on another employer sponsored plan soon when choosing to go with COBRA or ACA?
It’s hard to switch from COBRA to ACA insurance unless you have a qualifying life event or it’s Open Enrollment Period, and COBRA tends to be more expensive than ACA plans. So if you’re choosing COBRA, make sure you have the money to last the entire time you need insurance. ACA plans are the more affordable option for most people.
Does COBRA recognize the out of pocket expenses already paid under employer paid insurance or does the ex employee have to start over with out of pocket & deductibles?
COBRA does recognize the out of pocket expenses paid. COBRA is a continuation of your employer coverage, so it’s the exact same plan. For example, if you’ve already hit your deductible for 2020 and you lose your job, if you choose to continue on COBRA, you’ll still have a fully paid deductible.
If I am under my parents health insurance and if I am going to be 26 years old I know I can do cobra does that mean I have to pay the whole entire health insurance plan?
Yes, you’d have to pay the whole cost. I recommend you see plans and prices at healthsherpa.com, or call us at (872) 228-2549 for help.
Could you please comment on the potential risk of choosing an ACA plan currently given the pending court case “California v. Texas”? I recently lost my job and have to decide between COBRA and an ACA plan. I worry the ACA plan puts me at great risk if the program is dismantled.
https://en.wikipedia.org/wiki/California_v._Texas
Hello! It’s very unlikely the ACA will be dismantled any time soon, especially during the pandemic.
Hello,
I recently lost my job and my company is offering to reimburse my COBRA premium for six months. My monthly premium will be $1059.52. I cannot afford this after the six month reimbursement period. However, six months will take me through January of 2021. Could I stay on COBRA until the open enrollment period of ACA and then apply for a plan in the marketplace? My company insurance was really good: No deductible, $25 copay, $50 emergency room copay, 20% for generic prescriptions and 25% for specialty prescriptions, free ambulance. So I would like to stay on it as long as I can.
When your company stops reimbursing for COBRA, you’ll get a Special Enrollment Period where you’ll have 60 days from losing coverage to get an ACA plan. In January, give us a call at 872-228-2549 and we’ll get you set up with a new plan, or you can go to healthsherpa.com to see plans and prices.
Dear HealthSherpa:
I have a similar situation as that described above. I will loss my job next month and will be covered by Cobra for 18 month but my employer only subsidizes the cobra for 12 month which will be August 2021, 5 month before annual enrollment period of ACA for 2022. Am I eligible to start ACA in August 2022? Or do I have to stick to Cobra paying the higher premium till the end of the 18 month? Many thanks
When your employer stops subsidizing COBRA, you’ll be eligible for a 60-day Special Enrollment Period where you can enroll in an ACA plan. Come look at plans and prices at healthsherpa.com in July 2021 or give us a call at (872) 228-2549 to get set up with a plan.
I will be quitting my job in Illinois in October 2020. I will be moving from Illinois to Florida anytime between October 2020 to February 2021.
Should I elect to take Cobra beginning October 2020 or enroll in ACA Health Insurance under Special Enrollment circumstances?
Open enrollment for ACA Health Insurance is in November 2020 and becomes active January 2021. I anticipate either way I will need to enroll in Illinois during this period for 2021 coverage, correct?
I understand that it is difficult to randomly stop Cobra and obtain ACA Health Insurance; best to transition during open enrollment? Is this correct?
Unfortunately I don’t know what state I’ll be living in on January 2021 when insurance becomes active?
Please advise me on the best way to proceed with my Health Care coverage.
Thank you,
Lisa R.
You’ll have 60 days from quitting your job to enroll in an ACA plan. You have a couple options:
1. Enroll in an ACA plan in Illinois beginning in October 2020, then enroll in a Florida plan whenever you move (you’ll get a Special Enrollment Period when you quit your job and then another SEP when you move).
2. Enroll in a COBRA plan in October 2020, then switch to a Florida plan when you move (you’ll get an SEP if you move and your COBRA insurance doesn’t work in Florida, or you can switch during Open Enrollment)
As long as you are insured before the move, you’ll get a Special Enrollment Period when you move, so don’t worry about not knowing where you’ll be in January. You can just enroll in your new state when you know your moving date.
I’d recommend that you go to healthsherpa.com and see the price of an ACA plan and compare that to your COBRA option so you can pick the better deal. ACA plans are typically more affordable than COBRA because most people qualify for subsidies that lower the cost.
It is difficult to stop COBRA and switch to ACA – you have to do that during Open Enrollment or when your COBRA runs out, but if you move and your COBRA does not work in your new state, that will grant you a Special Enrollment Period where you can enroll in ACA coverage.
Hope that helps! Give us a call at (872) 228-2549 if you need help enrolling or have more questions.
I just lost my job Oct 27. I also just reached my deductible. I have a serious medical condition. I was in the process of getting pregnant authorization for a very expensive medication that would have been covered under my insurance company. i have no income whatsoever. Used all of my disability & am not eligible for unemployment. Please advise me of what I should do. Thank you.
Do you qualify for COBRA? You could do COBRA, or you could enroll in an ACA plan – and you might be eligible for Medicaid depending on your income. Go to healthsherpa.com to look at plans and prices or call us at (872) 228-2549
Hello,
I’m turning 26, but can receive adjunct benefits through the University I work part-time for. I’m unsure how to determine if going through the ACA or through my employer based health insurance would be better for me. What’s the best way to compare?
I recommend you give us some info so we can tell you how much an ACA plan would cost you, and then compare that cost to your employer based health insurance. Start here and we’ll tell you how much your plan would cost: https://www.healthsherpa.com/marketplace/zip_code
I have MS and I’ve been furloughed. I can get Cobra and pay a hefty monthly premium and fill my MS specialty medication at $15 per month as I did before furlough. If I get coverage through the Marketplace I qualify for a low monthly premium but they cannot give me the cost of my prescription after Kaiser pays 55%. I could be paying a couple thousand monthly for one prescription. I can’t afford that. I’m lost.
There may be other Marketplace plans that cover your medication better than the Kaiser plan. You can call us for help at (872) 228-2549.
Hi – I lost my job 12/31/19. I have COBRA until 6/30/21, the company stopped paying their share June 2020. Can I stay on COBRA until the 18 months end, 6/30/21, and then enter the ACA marketplace beginning 7/1/21?
Or, can I sign up for ACA now but delay beginning coverage until 7/1/21?
Thank you,
RJB
Your options are:
1. Stay on COBRA and pay the full price for your premium, then switch to an ACA plan. Once your COBRA runs out, you’ll have a 60-day window to enroll in ACA coverage.
2. Switch to an ACA plan right now during Open Enrollment (you have until Dec 15 in most states) and start coverage January 1, 2021. You can cancel your COBRA starting January 1.
It depends on your subsidy eligibility and how much your COBRA plan is, but for most people, ACA coverage is more affordable than COBRA (although there are some cases where this isn’t true). I’d recommend you check out ACA plans, see what the prices are, and compare that to what you’re currently paying for COBRA. You’ll have to give us some household information to get plans and prices. Enter your zip code and other info here to see plans in your area: https://www.healthsherpa.com/marketplace/zip_code
You can also call us for help at (872) 228-2549
Very helpful, thank you! How is the affordable aspect considered in cobra vs ACA? I will be forced to retire at age 60 in 2021. The cobra costs are very expensive but while employed, the insurance is very cheap. Depending how many months I work in 2021, my yearly self only coverage could be less than 9.85% of my income. However, if I work only 1 month in 2021, COBRA will be far above the 9.85% threshold and thus qualify me for the exchange. Could it be worth it to quit earlier in the year so that I could qualify for the exchange or is the % threshold based solely on income/insurance after I retire/quit?
Yes, could be worth it to quit earlier in the year. You’d have to calculate it out based on your costs. Also, Medicaid is based on monthly income, so you may qualify for that no matter when you quit.
You can give us a call at (872) 228-2549 to talk through the numbers.
Hi- I will be losing my employer based insurance 2/28/21. I’m weighing out my options between an ACA plan and COBRA. I was told that in order to qualify for a subsidy thru the ACA I will need to first be denied by Medicaid (based off my assets). Is this true?
It really depends on your income and household size. It sounds like you’ll either qualify for Medicaid or an ACA plan, which would likely be cheaper than COBRA. You can check your eligibility for subsidies at healthsherpa.com or call us at (872) 228-2549