Key Takeaways
- COBRA keeps your exact plan at full unsubsidized cost; the ACA marketplace prices on your now-lower income, compare both, always.
- The 60-day COBRA election window is retroactive, which lets you go uncovered-but-protected while deciding.
- A low-income transition year unlocks subsidies, cheap Roth conversions, and other one-year-only planning moves.
Employer health insurance ends with the job, and the bridge decision, COBRA versus an ACA marketplace plan versus a spouse's plan, is a real-money choice that most people make by reflex in a stressful week. The reflex answer (COBRA, it keeps everything the same) is frequently the expensive one, and the deciding variable is usually your income for the transition period, not the plans themselves.
The Three Doors
COBRA continues your exact employer plan, same network, same deductible progress, for up to 18 months at the full premium plus 2%, commonly $700-800/month single and $2,000-2,400 family, sticker shock is standard. The ACA marketplace (job loss is a special enrollment trigger; shop at healthcare.gov) prices on your projected household income for the year, and premium tax credits at transition-year incomes can cut premiums dramatically, this is where a sabbatical or between-jobs year gets cheap coverage. Door three, joining a spouse's plan within its 30-day special-enrollment window, is usually cheapest of all when available. Deductible arithmetic matters mid-year: if you have already met your deductible and treatment is ongoing, COBRA's continuity can beat a cheaper plan whose deductible starts at zero.
The Timing Tricks
COBRA's 60-day election window is retroactive to the loss of coverage: you can decline initially, stay alert, and elect (and pay) within the window only if something happens, effectively free catastrophic coverage for two months while you decide or start the new job. Marketplace coverage, by contrast, starts prospectively, so line up its start date with your coverage-end date if you go that route. And if a new job starts within a month or two, the retroactive-COBRA hover is often the whole strategy: most short gaps end up costing nothing.
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The Income and HSA Angles
Subsidy math rewards accuracy: credits key off your full-year modified AGI, so a high-severance year may kill subsidies (making COBRA competitive), while a true gap year maximizes them, project honestly, reconciliation happens on the tax return. A transition year with low income is also the classic window for Roth conversions, but conversions raise MAGI and can claw back subsidies, coordinate the two deliberately. If you land on an HSA-qualified marketplace plan, keep funding the HSA; and remember HSA balances can reimburse COBRA premiums during unemployment, one of the few premium uses the account allows.
Early Retirees: the Long Bridge
Retiring before 65 makes this a multi-year strategy, not a gap fix: marketplace coverage priced on managed taxable income becomes the default, and the withdrawal plan, spending from taxable basis and Roth dollars to keep MAGI in subsidy range, can be worth thousands per year in premium credits until Medicare. This is a place where tax planning and insurance planning are literally the same spreadsheet, and it is standard territory in our retirement planning for anyone eyeing the exit before 65.
Frequently Asked Questions
Can I switch from COBRA to a marketplace plan later?
Only at annual open enrollment or a new qualifying event; voluntarily dropping COBRA mid-year is not itself a trigger. COBRA's expiration, though, does open a special enrollment period.
Does COBRA cover my family too?
Each covered family member has independent election rights, sometimes covering only the family member with ongoing treatment via COBRA while the rest use a cheaper marketplace plan is the optimal split.
What about short-term health plans for the gap?
They are cheap because they exclude preexisting conditions and cap benefits, fine for a healthy month, dangerous for anything real. The retroactive-COBRA hover usually beats them at the same price: free.
Tony leads Attend Wealth, a fee-based wealth management firm in Atlanta serving professionals, families, and business owners. Advisory services are held to a fiduciary standard. More about Attend
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