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 less than $10 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.