COBRA vs ACA marketplace: which bridge costs less?

By Tom, CPA · Updated October 25, 2026

TL;DR: COBRA keeps your old plan but you usually pay up to 102% of its full cost. A marketplace plan can be far cheaper if your MAGI qualifies for the premium tax credit. Deductibles met, doctors and timing can tip the decision.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

COBRA: your old plan at full price plus a 2% fee, with a smile. When you leave a job, the COBRA election notice tends to arrive with a premium figure so large that people re-read it to check for a misplaced decimal. There's no decimal problem. That's what your coverage always cost; your employer just paid most of it.

Marketplace coverage is the usual alternative, and for early retirees with controllable income it is often much cheaper. But not always. This comparison covers cost, enrollment windows, deductibles, networks and a decision grid so you can choose deliberately.

CPA Warning Label: Your employer's share of the premium was a fringe benefit. COBRA is the moment you discover its actual size.

Cost comparison

The Department of Labor explains that COBRA lets workers continue group coverage for limited periods and that qualified individuals may be required to pay up to 102% of the cost to the plan. COBRA generally applies to employers with 20 or more employees; many states have similar "mini-COBRA" laws for smaller employers.

Marketplace premiums depend on age, location, plan and, crucially, the premium tax credit, which depends on your MAGI. For 2026 coverage the credit is available from 100% to 400% of the federal poverty line ($15,650 to $62,600 for one person; $21,150 to $84,600 for two in the lower 48).

Illustration: a couple, both 60, retire in March. Their COBRA notice shows $2,000 a month for family coverage. Assume a comparable marketplace silver plan has a full price of $1,500 a month ($18,000 a year) and they expect 2026 MAGI of $60,000.

The credit comes from the 2026 table: at about 284% of FPL the applicable percentage is about 9.46%, so the expected contribution is about $5,678 a year against an $18,000 benchmark. If their MAGI were $90,000, above the cliff, the marketplace would cost the full $1,500 a month and COBRA's lead would shrink to $500 a month in favor of the marketplace, before considering deductibles.

Special enrollment window

Losing job-based coverage triggers a marketplace Special Enrollment Period. HealthCare.gov says you can enroll within 60 days of losing job-based coverage, and you can also report expected loss up to 60 days in advance.

Key timing points:

• Electing COBRA doesn't close the door immediately. HealthCare.gov notes that if you're still within 60 days of losing job-based coverage, you can switch to the marketplace.
• Voluntarily dropping COBRA mid-year generally doesn't create a new marketplace window. Wait for open enrollment (November 1 to January 15) or for COBRA to run out.
• COBRA ending naturally, or your former employer stopping its contribution, does qualify for a Special Enrollment Period.
• COBRA is retroactive. You usually have time to elect it after receiving the notice, and coverage reaches back to the loss date. Some people use that as a safety net while they shop, but rules and deadlines are strict, so read your notice.

Deductible resets

COBRA continues the same plan, so the deductible and out-of-pocket amounts you've met this year carry over. A marketplace plan starts from zero. If you leave work in October after a surgery that met your family deductible, COBRA's last three months might be nearly free at the doctor's office, while a new marketplace plan would restart the meter.

The reverse is true early in the year. Leave in February and you've met little or nothing, so the reset costs you less.

For 2026, marketplace plans cap in-network out-of-pocket costs at $10,600 for one person and $21,200 for a family. That's the worst case to model for a mid-year switch.

Network continuity

COBRA keeps your doctors, your pharmacy formulary and any ongoing treatment authorizations. Marketplace plans may use narrower networks, especially lower-premium plans. If you're mid-treatment or rely on a specific specialist, check networks and drug coverage before switching. A cheaper premium can be expensive if your oncologist is out-of-network.

Decision grid

That last row matters: Medicare.gov says COBRA isn't considered group health plan coverage for the Part B Special Enrollment Period. People who rely on COBRA past 65 can end up with late penalties. See the Medicare enrollment timeline.

How long COBRA lasts

COBRA is temporary by design. Federal continuation periods are commonly up to 18 months after a job loss, with longer periods in some situations such as disability or certain family events. Your election notice states your maximum period. If you retire at 55, COBRA won't bridge you to 65, so the marketplace is the long-term plan either way; the question is only when to switch.

Illustration: the October retiree

Illustration: Dana, 62, single, retires October 1 after a knee replacement in May. She has already hit her employer plan's $4,000 out-of-pocket maximum. COBRA costs $800 a month. A marketplace silver plan would cost about $350 a month after credits, with a $5,000 deductible starting from zero.

• COBRA, October through December: $2,400 in premiums, and physical therapy visits are covered at no further cost because her out-of-pocket maximum is met.
• Marketplace: $1,050 in premiums, but she expects $2,000 of physical therapy that would fall under the new deductible, for about $3,050.

COBRA wins for those three months. Then, during open enrollment, she picks a marketplace plan starting January 1, when both options reset anyway and the credit gives the marketplace a large edge. The best answer is often "both, in sequence."

Pros and cons at a glance

A practical sequence

1. Before your last day, preview marketplace plans with an estimate of next year's MAGI.
2. Compare against the COBRA figure in your notice.
3. Check networks and drugs.
4. Pick the cheaper total of premiums plus expected out-of-pocket costs.
5. Mark the 60-day window and the COBRA election deadline on your calendar.

Related: HSA-eligible marketplace plans and why sharing ministries aren't a substitute.