What Is COBRA Insurance?

Q: How much does COBRA insurance cost?

COBRA premiums are the full cost of the group health plan plus a 2% administrative fee. Employers typically pay 70–80% of health premiums for active employees. After a job loss, you pay 100% of that cost plus the 2% fee. Average COBRA costs are roughly $500–$700/month for single coverage and $1,400–$1,800/month for family coverage, though these figures vary significantly by employer plan.

Q: Are there cheaper alternatives to COBRA?

Yes. A job loss is a qualifying life event that lets you enroll in an ACA marketplace plan outside of open enrollment. Depending on your income, you may qualify for premium tax credits that make marketplace plans significantly cheaper than COBRA. Healthcare.gov allows you to compare options. Medicaid may also be an option if your income drops significantly after a layoff.

COBRA insurance (Consolidated Omnibus Budget Reconciliation Act) lets you continue your employer-sponsored health coverage for up to 18 months after leaving a job — but you pay the full premium, including what your employer previously covered.

Definition

When you lose employer-sponsored health insurance — through a layoff, resignation, or reduction below full-time hours — COBRA gives you and your dependents the right to continue that exact coverage for a limited period. You keep access to the same doctors, network, and plan, but you now pay the entire premium yourself.

COBRA applies to employers with 20 or more employees. Most states have "mini-COBRA" laws that extend similar continuation rights to smaller employers. After receiving a COBRA election notice (typically sent within 14 days of your qualifying event), you have 60 days to decide whether to elect coverage and 45 additional days to make your first payment.

The cost shock is real: if your employer was paying $600/month of a $750/month premium, your out-of-pocket cost jumps from $150/month to $765/month (full premium plus the 2% admin fee) — a $615/month increase to your burn rate.

How It Affects Your Financial Runway

COBRA is one of the most significant and frequently overlooked additions to burn rate after a layoff. Many people calculate their runway based on their pre-layoff monthly expenses and forget that health insurance costs jump dramatically the moment employer coverage ends.

Before committing to COBRA, compare it against ACA marketplace plans (healthcare.gov). A job loss is a qualifying life event that triggers a Special Enrollment Period. If your expected income during the coverage period is moderate, premium tax credits can make marketplace plans substantially cheaper than COBRA — sometimes by $400–$800/month or more.

Worked Example

Prior health cost: $150/month (employee share of a $750/month plan, employer paying $600). COBRA cost: $765/month ($750 × 1.02). Increase to burn rate: $615/month.

Original burn rate $3,500 + $615 COBRA = $4,115/month effective burn

Savings $30,000 ÷ $4,115 = 7.3 months (vs. 8.6 months without COBRA add-on)

COBRA costs reduced runway by 1.3 months. An ACA plan at $250/month would instead add only $100/month to burn rate, preserving most of that runway.

Frequently Asked Questions

How much does COBRA insurance cost?

COBRA premiums are the full plan cost plus a 2% admin fee. Average costs are roughly $500–$700/month for single coverage and $1,400–$1,800/month for family coverage — compared to the much smaller employee-share you paid while employed. Always confirm your exact premium by requesting the COBRA election notice from your employer's plan administrator.

Are there cheaper alternatives to COBRA?

Yes. A job loss triggers a Special Enrollment Period for ACA marketplace plans. Depending on your projected income during unemployment, premium tax credits can make marketplace plans significantly cheaper than COBRA. Check healthcare.gov to compare. Medicaid may be available if your income drops substantially.