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The cost of COBRA can vary depending on where you live. For some people, COBRA can be a very expensive form of health insurance.
If you lose or quit your job, get a divorce, or no longer qualify as a dependent on a parent's health plan, you might be eligible for continued group health coverage under a law in the United States known as COBRA.
This article goes over how much COBRA costs, how to calculate your premium, how COBRA coverage affects your taxes, and what alternatives to COBRA are available.
COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) gives employees and their families who lose their group health insurance benefits the right to keep their coverage for a limited time under certain circumstances.
COBRA works just like your regular employer-based health plan—you will get the same benefits and have the same provider network. You can usually keep your coverage for between 18 to 36 months.
But one of the biggest disadvantages of COBRA is how much it costs. The cost of COBRA is calculated by adding what your employer has been paying toward your premiums to what you've been paying yourself, then adding a 2% service charge.
If you are leaving a job that's subject to COBRA rules (i.e. it's a private sector plan and the employer has at least 20 employees ), your employer will send you a notification to tell you if you’re eligible for COBRA and how much it will cost. You will then have 60 days to decide whether to take COBRA or not.
The COVID-19 national emergency extended the COBRA timeframe temporarily. However, since the national emergency ended on May 11, 2023, the normal timeframe for COBRA election windows began to once again be used as of July 2023. Extended deadlines are no longer applicable.
During your COBRA election window, you can compare prices on the health insurance Marketplace (exchange).
If you go this route, the special enrollment period for individual/family health insurance will continue for 60 days after you lose your job-based insurance—even if you have already enrolled in COBRA. You can still change your mind and decide not to use COBRA.
That said, switching to a new plan is not always the best option. For example, if you've already paid a lot of out-of-pocket costs for the year, switching to a Marketplace plan would mean starting over at $0 on the new plan's deductible and out-of-pocket maximums.
Choosing COBRA also means you do not have to worry about having a different provider network or covered drug list (formulary). This can be important if you have a chronic health condition or take medications that may cost you more because they are in a higher drug price tier.
While there are benefits of COBRA, a downside is that you will be responsible for both your and your employer's contributions—plus 2%.
As with most things related to health insurance, there is no right or wrong answer. Whether COBRA is the best choice for you depends on your needs and circumstances.
For some people, the cost of COBRA is just too expensive.
The high cost of COBRA is often because your employer is the one who is responsible for covering most of the monthly premiums when you have job-based insurance.
A 2022 study from the Kaiser Family Foundation reported that employers pay an average of 83% of the cost of an employee's health insurance. If family members are added, the employer still picks up around 73% of the total cost.
This makes coverage fairly affordable for most active employees and their families. However, there can be quite a “sticker shock” when the transition to COBRA happens, as the employer is no longer paying any part of the premiums. The exception would be if an employer offers a COBRA subsidy as part of a severance package.
If you are leaving your job, your human resources (HR) officer can tell you how much your COBRA premiums will be if you decide to continue coverage.
If you want to figure this out on your own, ask HR how much your employer is contributing toward your monthly coverage. Then, check your pay stub to see how much you're contributing.
After adding these figures, add another 2% (for the service fee).
This will show you exactly how much you’ll expect to pay for COBRA.
For example, say that you have $125 taken from each paycheck for health insurance. You get paid twice per month, so your portion of the monthly premiums is $250.
If your employer contributes $400 per month, the total cost of your job-based plan is $650 per month.
To calculate your total monthly COBRA premium, add a 2% service charge to the $650 for a grand total of $663 per month.
Here's a sample calculation:
If you work for a smaller employer (fewer than 20 employees) you may still be able to continue your group health coverage after leaving your job. This will depend on whether your state has established rules for state continuation of health insurance. This varies from state to state, and so do the rules that states have established in terms of the length of time you can use state continuation and how much can eb charged in administrative fees. Contact your state's Department of Labor (DOL) to find out more information about whether it will be possible for you to continue your small group health plan.
A single plan is easy to figure out with COBRA, but it gets more complicated if you need to switch from a family plan to a single plan. This might be necessary if you get divorced or turn 26 and are no longer eligible for coverage on your parent’s plan.
In these situations, an HR officer will look up the rate for single coverage on the same health plan that you are currently enrolled in.
To calculate the COBRA cost, the HR officer will have to determine:
After adding these two figures, you would add another 2% to calculate your total COBRA premium costs.
If you decide to continue your current health insurance with COBRA, there is another expense you might not be aware of: higher taxes.
While you're employed, your insurance premium is deducted from your paycheck before taxes along with other pretax deductions such as your 401(k) retirement plan and group term life insurance. These deductions make your net income smaller and, by doing so, lower your income tax.
When you lose job-based health coverage and switch to COBRA, you have to pay your COBRA premiums with after-tax money. That means that you lose the tax-free benefit you got while being employed.
You might be able to deduct part or all of your COBRA premiums from your taxes—but not everybody is eligible for this deduction. It’s best to work with an accountant or tax advisor to find out for sure.
The individual/family health insurance market is an alternative to COBRA. Before the Affordable Care Act (ACA), it excluded pre-existing conditions. With the ACA, you can get health Marketplace/exchange coverage regardless of your medical history.
You can purchase coverage during the annual open enrollment period (November 1 to January 15 in most states), and at any time during the year when you have a special enrollment period triggered by a qualifying life event (QLE).
There are several QLEs that allow you to buy insurance in the marketplace, including:
Other qualifying events (e.g., obtaining U.S. citizenship or being released from a federal penitentiary)
If you have a QLE, you are allowed special enrollment in the Marketplace and can purchase a plan that fits your budget and needs.
Most enrollees qualify for income-based premium subsidies that can reduce their monthly premium cost to a more manageable amount—even $0 in some cases. As of 2023, nine out of ten people with Marketplace coverage in the U.S. were receiving premium subsidies, so it's a misconception that these are just for those with low or modest incomes.
In the past, when an employer gave a subsidy to cover some of the cost of the first few months of COBRA, the end of that subsidy was not considered a qualifying event. But a new federal regulation now allows for special enrollment in the Marketplace if a person loses an employer subsidy for COBRA.
This means you can use COBRA while it's being subsidized by your former employer, and then you'll have the option to switch to a Marketplace plan once that subsidy ends, even if it's outside the normal open enrollment period.
In addition to individual marketplace plans, you can look at off-exchange plans that might cost less than COBRA. But it's important to note that premium subsidies only apply to Marketplace plans, not off-exchange plans. If you buy an off-exchange policy instead of COBRA, you'll still be responsible for the entire cost of the coverage.
COBRA is a provision of a federal law that allows you to continue your current job-based health insurance for a set time after you lose or leave your job. COBRA gives you the option to continue that plan for at least 18 months. (State continuation rules allow people in many states to continue group health coverage even if the employer's plan is too small to be subject to COBRA rules.)
However, COBRA can be costly. COBRA insurance can also affect your income taxes. If the cost of COBRA is not doable, you can often find lower-cost coverage on the health insurance marketplace.
Switching to an individual/family plan on or off the Marketplace can mean you face higher out-of-pocket costs. You also may need to change providers.
There's no right or wrong answer when it comes to deciding whether to use COBRA. If you've already spent money toward your out-of-pocket maximum for the year, and especially if you're in the middle of medical treatment and want to continue to use the same doctors and medications you already use, COBRA might well be worth the money.
But it's never your only option. In every state, you also have the option to enroll in self-purchased coverage through the Marketplace instead of COBRA. And you'll likely find that you're eligible for subsidies to offset the cost. Be sure to compare both options before making your decision.
The Department of Labor oversees COBRA compliance. They have a list of frequently asked questions about COBRA, which may be useful to you. You can also speak with someone at the agency by calling 866-487-2365.
If you need more information about the individual health insurance Marketplace, you can call the 24-hour hotline at 1-800-318-2596.
10 SourcesVerywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
By Elizabeth Davis, RN
Elizabeth Davis, RN, is a health insurance expert and patient liaison. She's held board certifications in emergency nursing and infusion nursing.
