Losing a job usually means losing the health plan that came with it, often on the last day of work or at the end of that month. There are two main ways to stay covered: COBRA, which keeps the same plan at full price, and a plan from the ACA (Affordable Care Act) Marketplace. Which one costs less depends mostly on the year's total household income.
A few words first
- COBRA (Consolidated Omnibus Budget Reconciliation Act): a federal law that lets someone keep the employer's health plan after leaving a job for a set period of time.
- ACA Marketplace: HealthCare.gov or a state's own exchange, where people buy individual health plans.
- Premium tax credit: the subsidy that lowers the monthly cost of a Marketplace plan, based on expected income for the year.
- Special Enrollment Period: a window outside open enrollment to sign up for coverage after a life event, like losing a job.
- Federal poverty level (FPL): the income measure the subsidy rules are based on.
- Deductible and out-of-pocket maximum: what gets paid before the plan pays, and the most that can be paid in a year. More in Which Insurance Matters in Your 20s.
How COBRA works
COBRA keeps the exact same employer plan, usually for up to 18 months after a job ends. The catch is price. The employer was often paying a big share of the premium. Under COBRA the person pays all of it, and the plan can charge up to 102% of the total cost.
It applies whether someone quits, gets laid off, is fired for ordinary performance reasons, retires, or has hours cut below the plan's eligibility line. The only exception is gross misconduct, a narrow standard that's different from being fired for cause.
The deadlines:
- At least 60 days to decide whether to elect COBRA
- At least 45 days after electing to make the first payment
- Coverage then reaches back to the day the job coverage ended
That backdating works like a safety net. Someone can wait to see whether they need care, as long as they elect and pay within the deadlines.
Two limits. Federal COBRA applies to employers with at least 20 employees. Most states have their own continuation rules for smaller employers, often called mini-COBRA. In New Jersey, where I live, it reaches groups of 1 to 50, also for 18 months at up to 102% of cost. And the 18 months is for the person who left the job. The longer 36-month periods apply to a spouse or dependents after events like divorce or the employee's death.
How the Marketplace works
Losing job-based coverage opens a 60-day Special Enrollment Period on HealthCare.gov or the state's exchange. The premium tax credit is based on expected household income for the whole year, so a layoff partway through the year can lower the cost a lot.
One 2026 change matters here. The enhanced subsidies that ran from 2021 through 2025 expired. For 2026, households above 400% of the federal poverty level generally get no premium tax credit at all. That line is about $62,600 for a household of 1 and $128,600 for a household of 4. Below it, subsidies can still cut the cost sharply.
When the Marketplace tends to win, and when COBRA does
The Marketplace tends to cost less when:
- The year's household income will be low enough for a subsidy
- Nobody is mid-treatment, and a lower premium matters most
- The gap between jobs could last a while
COBRA tends to cost less when:
- Income stays above the 400% line, so there's no subsidy
- The deductible or out-of-pocket max is already met for the year
- The gap is short, like a new job starting in 8 weeks
- Keeping the same doctors and network matters
The usual assumption is that the Marketplace is cheaper. That flipped for a lot of people in 2026, especially anyone whose income doesn't really drop after the job ends. Household income for the year includes severance, wages already earned, a spouse's income, and any consulting or contract work. If that lands above the 400% line, the full Marketplace premium applies, and COBRA, a group plan at a group rate with no new deductible, often comes out ahead.
It's also worth checking a spouse's employer plan. Losing coverage is usually a qualifying event for that plan too, and those windows are often only 30 days.
Two COBRA traps that cost money
Enrolling in COBRA blocks the subsidy for those months. Being offered COBRA doesn't affect the premium tax credit, so turning it down and taking a subsidized Marketplace plan is fine. But for any month someone is actually enrolled in COBRA, they're covered by an employer plan and can't claim the credit.
Dropping COBRA early doesn't open a new enrollment window. Someone who elects COBRA and decides in April it's too expensive generally has to wait for open enrollment to switch to the Marketplace. Running out of COBRA opens a window. Quitting it early doesn't.
That's why both options get priced before electing anything, for the rest of the plan year and not just the next month.
Turning 65 during the gap
COBRA doesn't extend the Medicare sign-up window. At 65 or older, signing up for Medicare on time matters more than COBRA, or there's a risk of a lifelong Part B penalty. More in Medicare Basics.
For everything else that comes up in the first month after a job ends, see The First 30 Days After a Layoff and Severance and Unemployment.