Health insurance after a layoff: COBRA vs. Marketplace

If you lose your job, you generally have two main ways to keep health coverage: COBRA continuation coverage through your old employer's plan, or a Marketplace plan through a Special Enrollment Period. Both have 60-day windows, so the first step is to find your coverage end date and any notice your plan has sent you. Rules vary by employer, plan and state, so treat this as a map and confirm details with your plan administrator.

What is COBRA and who can use it?

COBRA lets you keep the group health plan you had before the job loss. According to the U.S. Department of Labor's COBRA FAQs for workers:

COBRA applies to plans sponsored by private employers or unions with 20 or more employees, and to state and local governments.
It does not cover federal government plans or certain church plans.
Covered family members, such as a spouse and dependent children, can be qualified beneficiaries.
Coverage lasts 18 months for a termination (other than gross misconduct) or a reduction in hours.

How long do I have to decide on COBRA?

The Department of Labor says eligible people have 60 days to elect COBRA, counted from the later of the date coverage ends or the date the election notice is provided. After you elect, you have 45 days to make the first payment.

The plan must send an election notice within 44 days after a qualifying event such as a termination. If you have not received one and your coverage is ending, ask your HR team or plan administrator directly, and keep a record of when you asked.

How much does COBRA cost?

Under COBRA you usually pay the full premium: the portion you paid as an active employee, plus the employer's share, plus 2 percent, per the Department of Labor. An employer may voluntarily pay some or all of the cost as part of a severance package, but it is not required to. That is one reason to read any severance offer closely before you sign.

What is the Marketplace option?

Losing job-based coverage qualifies you for a Special Enrollment Period. HealthCare.gov says you must apply within 60 days of losing your job-based coverage, and that coverage can start the first day of the month after you lose it. Depending on income, you may qualify for premium tax credits and other savings, or for Medicaid or CHIP.

HealthCare.gov also notes that Marketplace plans may cost less than COBRA, especially if you qualify for savings based on your income. You do not have to enroll in COBRA to compare, and you can look at both before deciding.

COBRA or Marketplace: what should I compare?

Questions worth working through, using the plan documents and the Marketplace plan finder:

Monthly cost: the full COBRA premium versus Marketplace premiums after any income-based savings.
Doctors and prescriptions: whether your current providers and medications are covered under each option.
Deductible progress: whether you have already met part of this year's deductible under your current plan. Ask the plan administrator how COBRA treats it.
Timing: your COBRA election window and the Marketplace window both run from the loss of coverage, so a delay on one can close the other.

Can I switch later?

HealthCare.gov explains the rules in its COBRA guidance:

Open Enrollment runs November 1 to January 15, and during it you can enroll regardless of why COBRA is ending.
Outside Open Enrollment, you can move to a Marketplace plan if your COBRA is running out, or if you must pay its full cost because your employer stops contributing, within 60 days of that loss.
Ending COBRA early on your own generally means waiting for the next Open Enrollment unless you have another qualifying life event. Losing COBRA involuntarily before 18 months does qualify.
If you are eligible for Medicaid or CHIP, you can enroll at any time. Wait for a final eligibility decision before ending COBRA.

What should I do in the next few days?

Confirm the exact date your employer coverage ends.
Ask HR or the plan administrator for the COBRA election notice and the monthly premium.
Check whether your severance covers any COBRA cost.
Price a Marketplace plan with your expected income for the year.
Put both 60-day deadlines on your calendar.

What to watch

Layoff announcements often come with a benefits end date that is earlier or later than people expect, so read the notice you receive. For background on how mass layoffs are disclosed, see our guide to WARN notices and our explainer on SEC 8-K Item 2.05 filings. To see recent filings, visit the layoffs feed and the WARN tracker.

Sources

This article is general information, not legal or financial advice. Deadlines and benefits vary by employer, plan and state.

Sources are linked inline. Figures come from company filings with the SEC and state WARN notices. How we source.