COBRA is a coverage program named after the Consolidated Omnibus Budget Reconciliation Act, a law enacted in 1986. When you leave your job, your insurer must provide you (and spouse if they are covered) an election notice informing you of your rights to continue coverage within 14 days of when you notified the plan administrator or human resources that you were leaving your job. Your plan can require you to pay the full cost of your COBRA premiums—your premium contribution as an employee as well as the amount your employer paid on your behalf, plus a 2 percent administration fee. If you are in the middle of a course of treatment, you may want use COBRA to maintain the plan that has provided you with coverage for the care you are receiving, regardless of the cost. But if that is not the case, or when your treatment ends, you may find coverage in the Marketplace to be more affordable, especially if you qualify for premium tax credits.
Keep in mind that having an opportunity to sign up for COBRA doesn’t prevent you from qualifying for premium tax credits. You can apply for Marketplace plans as well as premium tax credits and cost-sharing reductions within 60 days of losing your job-based coverage (although there may be an extension for exceptional circumstances).
If you opt to enroll in COBRA in lieu of applying for a special enrollment period, you generally would have to wait until the next Marketplace open enrollment period to sign up for a Marketplace plan and receive premium tax credits, unless you exhaust your COBRA coverage. Dropping COBRA outside of open enrollment will not qualify you for a special enrollment period to sign up for coverage in the Marketplace.
If you choose to enroll in Marketplace coverage, you may need to plan carefully to avoid a gap in coverage from the time your employer plan ends to the date your Marketplace coverage takes effect. For example, on the federal Marketplace, if you sign up for a Marketplace plan after the 1st of the month, your coverage won’t begin until the first day of the following month (for example, if you apply for coverage on June 17th, your coverage will begin July 1). In all Marketplaces, if you know you will be losing your employer plan in advance, to avoid a gap in coverage you can apply for Marketplace coverage and select a Marketplace plan by the day you lose your employer plan; this will allow your Marketplace plan to start the first of the month following your loss of employer coverage. If your employer plan ends mid-month and your state uses the federal marketplace, you can apply for Marketplace coverage before the month of your coverage loss so that your plan begins the first of the month in which you will lose coverage (for example, if your coverage is set to end on July 15, and you attest this future loss of coverage to the federal Marketplace between May 16 and Jun 30, you can select a plan that begins on July 1, so long as the first month’s premium is paid on-time).
Alternatively, you can elect COBRA to begin once your employer plan ends and cancel your COBRA coverage once the Marketplace plan is scheduled to take effect. However, you will still need to apply for your Marketplace plan within 60 days of the loss of your employer plan (again, there may be an extension for exceptional circumstances), and if you enroll in COBRA to cover the gap, make sure to cancel your COBRA coverage once the Marketplace plan takes effect.
(26 C.F.R. § 1.36B-2; 45 C.F.R. § 155.420(b)(3); Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2021; Notice Requirement for Non-Federal Governmental Plans, 85 Fed. Reg. 29164, 29207 (May 14, 2020); Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment Parameters for 2024, 88 Fed. Reg. 25740, 25827 (Apr. 27, 2023); CCIIO, Federally-facilitated Exchange (FFE) Enrollment Manual (July 12, 2023).)