COBRA or Marketplace: Comparing Your Coverage Options

When you lose job-based coverage, COBRA and a Marketplace plan are both available, and the choice is usually decided by two things: what COBRA costs you each month, and whether you qualify for a premium tax credit. COBRA lets you keep the plan you already have, at up to 102% of its full cost. A Marketplace plan can be less expensive if you qualify for subsidies, which is often the case because COBRA generally does not count as employer coverage for subsidy purposes.

That last point is the one most people get wrong, and it can change the answer completely. Understanding why it works that way, and the timing rules that go with it, is the core of this decision.

What COBRA gives you

COBRA is a federal law that lets you continue group health coverage after a qualifying event. The Department of Labor describes it as giving workers and families who lose health benefits the right to continue group health benefits for limited periods of time under circumstances such as voluntary or involuntary job loss, reduction in hours, transition between jobs, death, divorce, and other life events.

Two features define the cost. First, you generally pay the entire premium yourself, including the share your employer used to pay. DOL states that qualified individuals may be required to pay the entire premium for coverage up to 102% of the cost to the plan. The extra 2% is a permitted administrative charge.

Second, COBRA applies to group health plans sponsored by employers with 20 or more employees in the prior year. Smaller employers are not covered by federal COBRA, though some states have their own continuation laws, which is a question for a state insurance department.

How long COBRA lasts

Duration depends on the qualifying event, and the federal rules set different maximums.

The regulation states that for a termination of employment or reduction in hours, the maximum coverage period ends 18 months after the qualifying event if there is no disability extension, and 29 months if there is a disability extension. The general rule for other qualifying events is 36 months after the qualifying event.

Qualifying event	Maximum COBRA period
Termination of employment or reduction in hours	18 months, or 29 with a disability extension
Death of the covered employee, divorce, or a dependent losing eligibility	36 months
Second qualifying event during an 18-month period	Extended to 36 months

Source: 26 CFR 54.4980B-7. A disability extension requires an SSA disability determination made within the first 60 days of coverage and notice to the plan administrator within 60 days of the determination.

The 36-month figure is something readers often assume applies to a layoff. It usually does not. A straightforward termination or hours reduction gives 18 months.

The subsidy point that decides the comparison

This is where the two options genuinely diverge, and where the answer is often counterintuitive.

For premium tax credit purposes, eligibility for employer-sponsored coverage generally blocks the credit only if the coverage is affordable and provides minimum value. But the regulations separate current employees from former employees on this point. For post-employment coverage, the rule states that a former employee who may enroll in eligible employer-sponsored coverage or in continuation coverage is eligible for minimum essential coverage under this coverage only for months that the former employee is enrolled in the coverage.

In plain terms: being offered COBRA does not make you ineligible for a premium tax credit. Being enrolled in COBRA does, for the months you are enrolled. The Marketplace's own guidance confirms the practical effect, noting that Marketplace plans may cost less than COBRA, especially if you qualify for savings based on your income.

So the comparison is not "COBRA versus nothing." It is "COBRA at up to 102% of the full premium with no subsidy" against "a Marketplace plan at your age-rated premium minus any credit you qualify for." For a household with modest income, the second number is frequently much lower.

Our guide to the enhanced premium tax credit expiration explains what changed in the subsidy calculation for 2026 and 2027, which affects how large that credit is.

Timing: the 60-day window and its limits

The Marketplace gives you 60 days from losing job-based coverage to enroll in a Marketplace plan. That window is the same event that opens your COBRA election, so the two clocks run together and the decision cannot be deferred indefinitely.

The harder question is what happens later, if you take COBRA now and want to switch to the Marketplace before COBRA runs out. The Marketplace addresses this directly:

• During open enrollment, you can enroll in a Marketplace plan regardless of why you are ending COBRA coverage.
• Outside open enrollment, you can switch if your COBRA coverage is running out, or if you have to pay the full cost because your former employer stops contributing or a government subsidy ends, or if you are still within 60 days of losing the job-based coverage.
• If you choose to end COBRA early for another reason, you have to wait until the next open enrollment to get Marketplace coverage unless you experience another qualifying event.

That third bullet is the trap. Dropping COBRA voluntarily is not itself a qualifying event. If you decide in month four that COBRA is too expensive, you may have no Marketplace path until the next open enrollment. The federal regulation on special enrollment periods reflects the same logic, treating a voluntary loss and specifically a failure to pay premiums on a timely basis, including COBRA continuation coverage premiums as not triggering a special enrollment period, with a narrow exception when an employer completely ceases its contributions.

The Marketplace also warns about a related sequencing mistake: always check your coverage start date before you end COBRA. Ending COBRA before the Marketplace plan begins leaves a gap, and a gap in coverage has its own consequences.

Where COBRA wins

COBRA is not automatically the wrong choice. It wins in specific circumstances.

You are mid-treatment or mid-pregnancy with a network and care team you need to keep. Continuity of providers and an unchanged deductible can matter more than the monthly difference, particularly if you have already met part of the deductible or out-of-pocket maximum for the year.

Your income is above the premium tax credit range. If you earn too much to qualify for a credit, the subsidy advantage disappears, and COBRA's continuity becomes the deciding factor.

You need the specific benefits your group plan has. Some group plans cover services or have networks that individual plans in your area do not match.

Your employer subsidizes COBRA. Some employers cover part of the cost for a period, often as part of a severance arrangement. That changes the arithmetic substantially. The Marketplace notes that a special enrollment period exists when an employer completely ceases its contributions to your COBRA coverage, which is a protection for exactly this situation.

Where the Marketplace wins

The Marketplace is often better in the mirror-image circumstances.

You qualify for a premium tax credit. Because COBRA enrollment, not COBRA eligibility, is what blocks the credit, a Marketplace plan with a credit can be substantially cheaper than the full COBRA premium.

Your income dropped. A job loss usually reduces household income, which can increase the credit. That combination, a lower income and a newly available subsidy, is the most common reason the Marketplace wins.

Your state expanded Medicaid. If your income falls below the Medicaid threshold, you may qualify for Medicaid instead, which the Marketplace notes you can enroll in any time with coverage starting immediately.

You do not need the group plan's specific network. If you are healthy and flexible about providers, an individual plan may meet your needs at lower total cost.

COBRA would consume a large share of your income. This is a judgment call rather than a rule, but paying 102% of a group premium for 18 months is a significant commitment during a period of uncertain income.

What to compare, in order

• Confirm whether federal COBRA applies. If the employer had fewer than 20 employees, check whether your state has a continuation law instead.
• Get the COBRA premium in writing and compare it to your full Marketplace premium before any credit.
• Estimate your household income for the coverage year and find out what credit, if any, you qualify for. This is the number that usually decides the comparison.
• Compare networks and formularies, because continuity of care can outweigh a premium difference.
• Check your state's Medicaid threshold, since a job loss can push a household below it.
• Note both deadlines: 60 days from the coverage loss for Marketplace enrollment, and the COBRA election deadline in your notice.
• If you elect COBRA, put a calendar reminder at the point where your subsidy eligibility or your plans might change, and do not drop COBRA outside a qualifying event without checking your options first.

One timing note for the coming plan year. HealthCare.gov lists December 15 as the deadline for January 1 coverage and January 15 as the close of open enrollment for 2027. A coverage loss opens a 60-day window regardless of those dates, but the open enrollment calendar determines what happens if you end COBRA for a reason that is not itself qualifying.

If you are weighing COBRA against a Marketplace plan and want to work through the subsidy side, ask NavaQuote about health coverage options. Bring your COBRA notice with the premium, your coverage end date, your expected household income, and your doctors and prescriptions. Our off-exchange ACA plans guide covers the option where no credit applies, and our self-employed health insurance guide covers the income estimation problem if you are starting your own work.