COBRA Alternatives: Know Your Coverage Options

COBRA insurance is a federal law that lets workers keep their employer health plan after losing job-based coverage. The Consolidated Omnibus Budget Reconciliation Act requires employers with 20 or more employees to offer continued coverage after qualifying events such as job loss, reduced hours, divorce or a dependent aging out of a plan. 

COBRA coverage lasts 18 months for most workers and up to 36 months after certain events like the death of a covered employee, per the U.S. Department of Labor. You pay the full premium plus up to a 2% administrative fee, which totals up to 102% of the plan cost. 

• COBRA coverage mirrors your previous employer plan, including the same doctors, hospital networks, copays and deductibles.
• You have 60 days from the date of the qualifying event to elect COBRA.
• COBRA does not cover life insurance or disability benefits.

Jump to: What Are the Alternatives to COBRA Insurance?

COBRA insurance makes sense when you have ongoing medical care and can't afford a gap in coverage. You keep your existing network and plan benefits, but you absorb both your share and your employer's share of the premium, which is often much higher than what you paid as an employee. For most people who lose a job, Marketplace plans with premium tax credits cost much less than COBRA.

The best COBRA alternatives depend on your income, age and whether you're leaving employer coverage voluntarily or involuntarily. Losing employer coverage qualifies you for a 60-day Special Enrollment Period to enroll in a Marketplace plan, join a spouse's or parent's plan or get Medicaid if your income qualifies. Review each option before your 60-day window closes, since missing it limits your choices until the next open enrollment period.

Marketplace plans through HealthCare.gov are the top COBRA alternative for most people who lose job-based coverage. ACA Marketplace plans cover the same 10 essential health benefits, don't reject applicants for pre-existing conditions and often cost less than COBRA after premium tax credits, which vary by income. 

You have 60 days from the qualifying event to enroll through your Special Enrollment Period. Health insurance for unemployed workers is often most affordable through Marketplace Silver plans with tax credits applied.

Joining a spouse's or parent's employer health plan is often the cheapest COBRA alternative when you lose job-based coverage. Losing employer coverage qualifies you for a Special Enrollment Period on a family member's plan, per HealthCare.gov. Adults under 26 can join a parent's plan regardless of their marital status, residency or access to other coverage, per the Affordable Care Act. 

1. Contact the family member's HR department within 30 days of losing your coverage.
2. Adults under 26 can join a parent's plan whether they're married, living away from home or enrolled in school.
3. Ask about the premium increase for adding a dependent, since the employer contribution only applies to the employee.
4. Request written confirmation of your enrollment start date and coverage details.

Medicaid is a free or low-cost health insurance program for adults with household incomes at or below 138% of the federal poverty level in states that expanded Medicaid. Eligibility rules, covered services and income thresholds vary by state. You can apply year-round through your state Medicaid agency or HealthCare.gov without waiting for an open enrollment period. 

People who may qualify for Medicaid include: 

• Low-income adults in states that expanded Medicaid under the Affordable Care Act
• Pregnant women, who qualify at higher income thresholds than standard Medicaid in most states
• Children and teens through the Children's Health Insurance Program (CHIP)
• Adults with qualifying disabilities or blindness
• Low-income seniors who also qualify for Medicare, known as dual-eligible beneficiaries

Group health plans through professional associations or industry organizations let workers without employer coverage buy into a pooled plan at potentially lower rates. The American Bar Association, freelancer unions and many trade organizations offer group health insurance to members. Coverage, costs and ACA compliance vary by association, so compare carefully before enrolling.

Short-term health insurance provides temporary coverage for one month to three years depending on state law, at lower premiums than ACA Marketplace plans. Short-term plans are not required to cover ACA essential health benefits and can deny claims for pre-existing conditions, making them a higher-risk option for people with ongoing health needs. Some states do not permit short-term plans, and others cap coverage at three months.

Medicare is a federal health insurance program for adults 65 and older and some people under 65 with qualifying disabilities. Losing employer coverage near age 65 means Medicare is often a better option than COBRA. Your Initial Enrollment Period opens three months before your 65th birthday, per Medicare.gov. Missing that window triggers a permanent 10% Part B premium penalty for each 12-month period you went without coverage.

COBRA makes sense when you're in active treatment or need to keep a specific doctor or hospital network. For most other situations, Marketplace plans, Medicaid or a family member's employer plan are worth comparing first. Your 60-day Special Enrollment Period starts the day you lose coverage, so act before it closes. If you missed your window, review your options for getting health insurance after open enrollment before paying your first COBRA premium.

We've answered the most common questions about COBRA alternatives: