COBRA vs ACA (Obamacare): Which Health Insurance Is Better After a Layoff?

When you lose your job, health insurance becomes an immediate concern. You'll likely choose between COBRA (continuing your employer's plan) and ACA marketplace insurance (Obamacare). This guide compares both options to help you make the right choice.

COBRA vs ACA: Quick Comparison

What Is COBRA?

COBRA Explained

COBRA (Consolidated Omnibus Budget Reconciliation Act) lets you temporarily continue your employer's health insurance after leaving your job. You pay the full premium yourself.

Who Qualifies for COBRA?

You're eligible for COBRA if:

• Your employer has 20+ employees
• You were enrolled in the health plan
• You lost coverage due to qualifying event (layoff, reduced hours)
• You're not terminated for gross misconduct

COBRA Costs

Here's the reality of COBRA pricing:

What you paid as employee: Perhaps $200-500/month (your portion)

What COBRA costs: The FULL premium + 2% admin fee

Example:

• Monthly premium: $1,800 (family plan)
• Your old cost: $400/month (employer paid $1,400)
• COBRA cost: $1,836/month ($1,800 + 2% admin)

COBRA is expensive because you're now paying what your employer used to pay.

What Is ACA/Obamacare?

ACA Marketplace Explained

The Affordable Care Act (ACA) created health insurance marketplaces where individuals can buy coverage. These are sometimes called "Obamacare" plans.

Key ACA Features

• Guaranteed coverage regardless of pre-existing conditions
• Subsidies available based on income
• Standardized plan levels (Bronze, Silver, Gold, Platinum)
• Essential health benefits required
• Special enrollment when you lose job-based coverage

ACA Costs

Monthly premiums vary by:

• Your age
• Your location
• Plan level (Bronze through Platinum)
• Tobacco use
• Your income (for subsidy eligibility)

With subsidies, ACA can be very affordable. Without subsidies, it may be expensive.

Which Is Cheaper: COBRA or ACA?

It Depends on Your Income

If your income is low-to-moderate:

• ACA with subsidies is usually much cheaper
• Premium tax credits reduce monthly cost
• Cost-sharing reductions (Silver plans) lower deductibles

If your income is high:

• COBRA might cost similar to unsubsidized ACA
• Compare specific plans in your area

The Subsidy Calculation

ACA subsidies are based on your estimated income for the year:

• If recently laid off, your annual income will be lower
• Lower income = larger subsidy = cheaper ACA premium

Example:

• Family of 4, $60,000 estimated income for year
• Full-price Silver plan: $1,400/month
• With subsidy: Maybe $200-400/month
• Compared to COBRA at $1,800/month

When COBRA Might Be Cheaper

COBRA could cost less if:

• Your income is too high for ACA subsidies
• You're only covering 1-2 people
• Your employer's plan was unusually good/cheap

Comparing Coverage

COBRA Coverage

Advantages:

• Exact same coverage you had
• Same doctors and network
• No changes to prescriptions
• Continuous coverage (no gaps)

Disadvantages:

• No flexibility—you get what the employer offers
• Coverage ends after 18 months
• If employer changes plan, yours changes too

ACA Coverage

Advantages:

• Choice of plan levels and carriers
• Can select network with your doctors
• Keeps coverage as long as you pay
• Subsidies can reduce costs significantly

Disadvantages:

• May need to change doctors/network
• May have different formulary (prescriptions)
• Learning new plan details
• Deductibles may reset

When to Choose COBRA

COBRA Makes Sense If:

You need continuous coverage without gaps:

• Already meeting deductible this year
• In the middle of treatment
• Pregnancy or upcoming medical needs
• Complex prescriptions in current formulary

You value keeping your doctors:

• Established specialists you want to keep
• Ongoing treatment relationships
• Doctors not in ACA plan networks

Financial considerations:

• High income (no ACA subsidies)
• Only need short-term coverage (new job with insurance soon)
• Employer plan is unusually affordable

For short-term needs:

• Bridge until new employer's plan kicks in
• Covering specific medical event

COBRA Strategy: Retroactive Enrollment

You can wait up to 60 days to elect COBRA. It's retroactive to your coverage loss date. Strategy:

1. Don't elect COBRA immediately
2. If you need care during the 60 days, then elect COBRA
3. Pay premiums retroactively
4. If you don't need care, don't elect (saves money)

Risk: If something happens after 60 days, you're uninsured.

When to Choose ACA

ACA Makes Sense If:

You qualify for subsidies:

• Lower/moderate income for the year
• Subsidies make ACA significantly cheaper
• Want predictable, affordable monthly cost

You need long-term coverage:

• Job search may take a while
• No new job with benefits on horizon
• COBRA's 18 months isn't enough

Flexibility matters:

• Want to choose your plan level
• Fine with changing networks/doctors
• Prefer more control over coverage

New doctors acceptable:

• Doctors available in ACA networks
• Not in middle of active treatment
• Willing to research new providers

Alternatives to COBRA

Other Options to Consider

Spouse's employer plan:

• Your job loss is a qualifying event for their special enrollment
• Often the best option if available
• Compare costs

Short-term health insurance:

• Cheaper but limited coverage
• Doesn't cover pre-existing conditions
• Not ACA-compliant
• Better than nothing but has risks

Medicaid:

• If income drops very low
• Eligibility varies by state
• Check if you qualify based on current income

Healthcare sharing ministries:

• Not insurance, but can help with costs
• Religious or ethical requirements often apply
• Not guaranteed coverage

How to Enroll

COBRA Enrollment

1. Wait for COBRA notice from employer/plan (within 14 days of coverage loss)
2. Review the notice for costs and deadlines
3. Elect coverage within 60 days if choosing COBRA
4. Pay initial premium (covers back to coverage loss date)
5. Continue paying monthly premiums

ACA Enrollment

1. Go to HealthCare.gov (or state marketplace)
2. Apply within 60 days of losing job coverage (Special Enrollment Period)
3. Provide income estimate for subsidy calculation
4. Compare plans in your area
5. Select and enroll in chosen plan
6. Pay first premium to activate coverage

Timing Considerations

ACA coverage starts:

• If enrolled days 1-15 of month: 1st of following month
• If enrolled days 16-31: 1st of month after next

Plan accordingly to minimize coverage gaps.

Decision Checklist

Questions to Answer

1. What's your estimated income for this year? (Determines ACA subsidy)
2. How long do you need coverage? (New job soon vs. extended search)
3. Are you in active treatment? (Continuity of care matters)
4. Are your doctors in ACA networks? (Check before deciding)
5. Have you met your deductible this year? (COBRA keeps progress)
6. Is spouse coverage available? (Often best option)

The Comparison Process

1. Get your COBRA cost from the notice
2. Check ACA plans and prices at HealthCare.gov
3. Estimate your subsidy based on projected income
4. Compare total costs (premium + out-of-pocket)
5. Compare networks and doctor availability
6. Make the decision based on your situation

Key Takeaways

1. COBRA is your employer plan at full cost—very expensive without employer contribution
2. ACA marketplace may be cheaper—especially with subsidies
3. Subsidies are based on annual income—job loss lowers income, increasing subsidy
4. COBRA keeps your doctors—same network, same coverage
5. ACA requires network research—check if your doctors are covered
6. 60-day deadline for both—don't miss your enrollment window
7. COBRA can be retroactive—elect within 60 days if needed
8. Consider spouse's plan first—often the best option
9. Medicaid if income is very low—check eligibility
10. Don't go uninsured—one accident or illness can be financially devastating

Related Resources

• First 24 Hours After Layoff
• Unemployment Benefits Guide
• Budget Planner After Job Loss
• Emergency Fund Guide

Disclaimer: This guide provides general information about health insurance options. Coverage, costs, and availability vary by location and circumstances. Consult HealthCare.gov and your COBRA administrator for specific details.