COBRA vs ACA: The Complete Health Insurance Guide After Layoff

Updated January 2025 18 min read Healthcare Decision Guide

Losing your job-based health insurance is one of the most stressful aspects of a layoff, especially if you have a family or ongoing medical needs. The good news: you have options. The challenging part: understanding which option is right for your specific situation.

This comprehensive guide will walk you through everything you need to know about COBRA and ACA marketplace insurance, including real cost comparisons, decision frameworks, and step-by-step enrollment instructions.

1. Understanding Your Options

When you lose employer-sponsored health insurance, you typically have three main paths:

• COBRA: Continue your exact employer plan at full cost
• ACA Marketplace: Purchase an individual plan with potential subsidies
• Spouse's plan: Join a partner's employer coverage if available

Let's focus on the first two, as they're the most common choices for people navigating a layoff.

2. COBRA Explained in Detail

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that allows you to continue your employer's health plan for up to 18 months after job loss. Here's what you need to know.

How COBRA Works

When you're laid off, you can elect to keep your exact same health insurance plan. The coverage, network, deductibles, and benefits remain identical. The only thing that changes is who pays: you pay the full premium (the portion you used to pay plus the portion your employer paid) plus a 2% administrative fee.

COBRA Eligibility

COBRA is available if:

• Your employer has 20 or more employees
• You were enrolled in the company's health plan
• You lost coverage due to a "qualifying event" (layoff, reduced hours, etc.)
• You're not terminated for gross misconduct

Smaller employers (under 20 employees) may be covered by state "mini-COBRA" laws with similar provisions.

COBRA Coverage Period

• Standard coverage: 18 months
• Disability extension: Up to 29 months if you become disabled
• Additional qualifying events: Can extend to 36 months in some cases

COBRA Costs: The Reality

COBRA is expensive because you pay the full premium. Here are typical 2025 costs:

3. ACA Marketplace Explained

The Affordable Care Act (ACA) marketplace, also known as Healthcare.gov (or your state's exchange), offers individual health insurance plans with potential premium subsidies based on your income.

How the Marketplace Works

The ACA marketplace offers plans in four metal tiers:

• Bronze: Lowest premiums, highest out-of-pocket costs (60% coverage)
• Silver: Moderate premiums and costs, eligible for cost-sharing reductions (70% coverage)
• Gold: Higher premiums, lower out-of-pocket costs (80% coverage)
• Platinum: Highest premiums, lowest out-of-pocket costs (90% coverage)

Special Enrollment Period

A layoff qualifies you for a Special Enrollment Period (SEP). You have 60 days from your job loss to enroll in a marketplace plan outside of Open Enrollment.

Premium Tax Credits (Subsidies)

This is where the ACA often becomes more affordable than COBRA. Premium tax credits reduce your monthly premium based on your expected annual income. After a layoff, your projected income for the year is likely lower, which can mean significant subsidies.

4. Real Cost Comparisons

Let's look at realistic scenarios to understand the actual cost difference between COBRA and ACA.

Scenario 1: Single Professional, Mid-Year Layoff

Potential Savings: $2,400 - $3,300 over 6 months

Scenario 2: Family of Four, Layoff in Q4

Potential Savings: $8,400 - $10,800 over 6 months

5. Decision Framework: COBRA vs ACA

Use this framework to determine which option is right for you.

Choose COBRA If:

• You're in active treatment with a specific doctor or hospital
• You expect to find a job with benefits within 1-2 months
• Your employer is paying for COBRA as part of severance
• Your income is too high for ACA subsidies
• You've already met your deductible for the year

Choose ACA If:

• You expect an extended job search (3+ months)
• Your reduced income qualifies you for subsidies
• You're flexible about changing doctors or networks
• COBRA premiums are unaffordable
• You haven't yet met your current plan's deductible

6. Special Situations

The COBRA Bridge Strategy

Here's a strategy many people don't know about: COBRA election is retroactive, and you have 60 days to decide. This creates an opportunity.

1. Don't elect COBRA immediately
2. Research ACA options during your 60-day window
3. If you need coverage during this period (emergency, illness), elect COBRA retroactively
4. If you don't need it, enroll in ACA and save the COBRA premiums

Pregnancy and Layoffs

If you're pregnant when laid off, healthcare continuity is especially important. Consider:

• COBRA keeps your exact OB-GYN and hospital
• ACA plans must cover maternity care (no pre-existing condition exclusions)
• Check if your preferred providers are in ACA plan networks
• Consider the timing of delivery vs. plan year for deductibles

Pre-Existing Conditions

Thanks to the ACA, pre-existing conditions cannot be used to deny coverage or charge higher premiums on marketplace plans. Both COBRA and ACA must cover your existing conditions.

7. How to Enroll

COBRA Enrollment Steps

1. Wait for COBRA notice: Your employer must send you COBRA election forms within 14 days of termination
2. Review the forms: Understand the premium costs and coverage details
3. Complete election form: Sign and return within 60 days
4. Make first payment: You have 45 days after election to make your first payment
5. Continue monthly payments: Payments are typically due the 1st of each month

ACA Marketplace Enrollment Steps

1. Gather documents: Social Security numbers, income information, current coverage details
2. Visit Healthcare.gov: Or your state's exchange if applicable
3. Create an account: You'll need an email and password
4. Report qualifying event: Select "lost job-based coverage" as your reason for SEP
5. Enter income estimate: Be accurate—this determines your subsidies
6. Compare plans: Look at premiums, deductibles, and provider networks
7. Select a plan: Complete enrollment and make first payment

8. Mistakes to Avoid

Missing Deadlines

The 60-day enrollment window is firm. Missing it can leave you uninsured until the next Open Enrollment period. Set calendar reminders.

Underestimating ACA Subsidies

Many people assume they won't qualify for subsidies because of their previous salary. Remember: subsidies are based on this year's expected income, which may be much lower after a layoff.

Not Checking Networks

Before choosing an ACA plan, check if your doctors and preferred hospitals are in-network. Lower premium plans often have narrower networks.

Forgetting About the Deductible

If you've already met your deductible for the year on your employer plan, COBRA preserves that progress. A new ACA plan resets your deductible.

Ignoring State Marketplaces

Some states (California, New York, Massachusetts, etc.) have their own marketplaces with additional plan options. Check if your state has one.

9. Frequently Asked Questions

Can I switch from COBRA to ACA later?

Yes, but only during Open Enrollment (November 1 - January 15) or if you have another qualifying event. You can't switch arbitrarily mid-year.

Is there a gap between job coverage ending and COBRA starting?

No. COBRA coverage is retroactive to the day after your employer coverage ends, as long as you elect it within 60 days.

What if I can't afford COBRA or ACA?

Check if you qualify for Medicaid, which is free or very low-cost health coverage for people with limited income. Eligibility varies by state.

Will I get penalized for not having coverage?

There's no longer a federal penalty for being uninsured. However, some states (California, Massachusetts, New Jersey, DC, Rhode Island, Vermont) have their own individual mandates.

Can my spouse add me to their employer plan?

Yes, your job loss qualifies as a life event that allows your spouse to add you to their plan outside of their employer's open enrollment.

Making Your Decision

The choice between COBRA and ACA isn't one-size-fits-all. It depends on your income, healthcare needs, provider preferences, and how long you expect to be job searching. Take the time to research both options, run the numbers, and make the choice that's right for your family.

Remember: you have 60 days to decide. Use that time wisely. And if you're unsure, consider consulting with a health insurance broker or navigator who can help you understand your options at no cost.