Is a marketplace plan really cheaper than COBRA?

Often, after a pay drop, because the subsidy scales with projected income while continuation charges the full group premium. Compare the actual quotes for your household and ZIP, then check the network and the drug formulary. A cheaper premium that excludes your doctors is not cheaper care.

What happens if my income rises after I enroll?

If actual income ends above your projection, part of the subsidy can be repaid when you file, and a large severance or signing bonus is a common cause. Update the projection when the new salary is known and keep the record of the update.

How long is the special enrollment window?

Losing employer coverage generally opens a sixty-day window measured from the coverage end date. The COBRA election window has the same length, so both decisions compete for the same period. Record the end date the day you receive it.

Can I switch from COBRA to a marketplace plan later?

Dropping coverage usually opens a new special enrollment window, but the timing and the subsidy depend on the date and your income then. Do not drop continuation before the replacement plan is confirmed, and keep the quotes from both routes in one file.

COBRA vs ACA Marketplace: Subsidy Math

After leaving a US job, the ACA marketplace is often cheaper than COBRA: subsidies follow income, and a mid-year drop is a qualifying event. Run the numbers in the first month, not the second.

The Comparison

Income-based subsidies: premium tax credits scale with household income; leaving a job usually drops income, raising eligibility (healthcare.gov).
Special enrollment: loss of employer coverage opens an 60-day marketplace window — file the change within 30 days of coverage end (see the COBRA guide).
Reconciliation trap: income jumps later in the year (new job, severance) can claw back subsidies on the 1095-A file; the W-2/1095-C trail is in the records guide.

The Plan Lines

Deductibles, networks, and HSA rules differ by plan; the annual audit is in the open enrollment guide. FSA balances die at termination (see the exit checklist), and the cash plan in the 30-day plan covers premium months.

Put the rule into action

Write the letter with the free COBRA Election Notice Letter generator. The state pages carry the local payout and notice windows, and the application tracker keeps the follow-up date in writing.

Put the rule into action

Income projection and reconciliation

A marketplace subsidy is computed from the income you project for the whole year, which is exactly the number that gets unreliable after a separation. Two errors cost money in opposite directions.

Projecting too low. A severance lump, a signing bonus, or a new salary arriving in the same year can push actual income above the projection. Subsidy excess is repaid when you file, so the reconciliation is a real bill, not a footnote.
Projecting too high. An over-estimate gives you a smaller subsidy than you were owed, and the difference is only visible after the year closes.
Updating mid-year. When the new job start date is known, change the projection instead of waiting for the filing. The record of the update is your defense if the numbers disagree later.

Use the actual documents, not guesses: the separation package states severance timing, and the offer letter states the new salary. The Form 1095-C and W-2 lines are how you reconstruct which months were employer-covered.

Network and pharmacy checks

Cheaper premiums mean nothing if your care is not covered. Four checks before you switch.

Providers. Search your current doctors and hospital in the new plan network, and screenshot the result as part of the decision file.
Medications. Confirm each drug is on the formulary and at which tier. A specialty drug tier changes the monthly cost more than the premium does.
Referrals and prior authorization. Many lower-cost plans require them; a plan you cannot use quickly is not a bridge.
Continuation rights. If the marketplace route fails, know whether your continuation window is still open; the windows have fixed lengths and the notice date starts them.

Do the checks before the election, not after the first bill. The COBRA calculator gives you the continuation side of the same comparison, and the special enrollment entry states the window.

The 60-day decision sequence

Both routes run on the same clock, so the decision has to be compressed. A realistic sequence:

Day 0. Record the coverage end date and the notice date separately.
Days 1-7. Collect the continuation tier quotes and a marketplace quote for the same household size and ZIP.
Days 7-14. Run the network and pharmacy checks; adjust the income projection with the severance and new-salary figures.
Days 14-30. Choose and elect in writing, then confirm the effective date of whichever route you picked.
After the choice. Put premium due dates in the tracker, and keep both quotes in the file in case you need to switch.

If you are undecided near the end of the window, elect continuation to avoid a gap and keep the marketplace comparison open. The exit hub carries the related checklist pages.

Route	Cost responds to	Main risk
Employer continuation	Full group premium and family tier size	Cost stays high all year regardless of income
Marketplace plan	Projected household income and household size	Subsidy repayment if income ends up higher
State continuation	State-set caps and eligibility rules	Shorter or narrower coverage than the federal rule
Short-term plan	Health underwriting terms	Exclusions that block the care you actually need

The live rule text sits on the California COBRA rule page and the New York COBRA rule page, along with the equity tax trails guide hub. Confirm there before you put a date or a dollar amount in writing.

Frequently Asked Questions

Is a marketplace plan really cheaper than COBRA?: Often, after a pay drop, because the subsidy scales with projected income while continuation charges the full group premium. Compare the actual quotes for your household and ZIP, then check the network and the drug formulary. A cheaper premium that excludes your doctors is not cheaper care.
What happens if my income rises after I enroll?: If actual income ends above your projection, part of the subsidy can be repaid when you file, and a large severance or signing bonus is a common cause. Update the projection when the new salary is known and keep the record of the update.
How long is the special enrollment window?: Losing employer coverage generally opens a sixty-day window measured from the coverage end date. The COBRA election window has the same length, so both decisions compete for the same period. Record the end date the day you receive it.
Can I switch from COBRA to a marketplace plan later?: Dropping coverage usually opens a new special enrollment window, but the timing and the subsidy depend on the date and your income then. Do not drop continuation before the replacement plan is confirmed, and keep the quotes from both routes in one file.

The special-enrollment window and the subsidy calculation are federal rules, and the plan-size threshold that pushes a plan to state continuation is a state rule graded from reported sources in this build. Confirm the continuation rule with the state agency named on the state rule pages before you assume federal COBRA reaches your plan, write the election with the COBRA election notice generator, and keep the marketplace quote beside the COBRA quote in the COBRA cost calculator.