How Much Is COBRA Insurance? Cost, Implications, Alternatives

The cost of COBRA can vary depending on where you live. For some people, COBRA can be a very expensive form of health insurance. 

If you lose or quit your job, get a divorce, or no longer qualify as a dependent on a parent’s health plan, you might be eligible for continued group health coverage under a law in the United States known as COBRA.

This article goes over how much COBRA costs, how to calculate your premium, how COBRA coverage affects your taxes, and what alternatives to COBRA are available.

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What Is COBRA?

COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) gives employees and their families who lose their group health insurance benefits the right to keep their coverage for a limited time under certain circumstances.

COBRA works just like your regular employer-based health plan—you will get the same benefits and have the same provider network. You can usually keep your coverage for between 18 to 36 months.

That said, there are some downsides (like cost) that may make you not want to choose COBRA.

One of the biggest disadvantages of COBRA is how much it costs.

The cost of COBRA is calculated by adding what your employer has been paying toward your premiums to what you’ve been paying yourself, then adding a 2% service charge.

Making Your Decision

If you are leaving a job, your employer will send you a notification to tell you if you’re eligible for COBRA and how much it will cost. You will then have 60 days to decide whether to take COBRA or not.


The COVID-19 national emergency extended the COBRA timeframe temporarily. However, since the emergency is expected to end on May 11, 2023, the normal timeframe for COBRA election windows will start being used again in July 2023.

During your COBRA election window, you can compare prices on the health insurance marketplace. 

If you go this route, the special enrollment period will continue for 60 days after you lose your job-based insurance—even if you have already enrolled in COBRA. You can still change your mind and decide not to use COBRA.

That said, switching to a new plan is not always the best option. For example, if you’ve already paid a lot of out-of-pocket costs for the year, switching to a marketplace plan would mean starting over at $0 on the new plan’s deductible and out-of-pocket maximums.

Choosing COBRA also means you do not have to worry about having a different provider network or covered drug list. This can be important if you have a chronic health condition or take medications that may cost you more because they are in a higher drug price tier.

While there are benefits of COBRA, a downside is that you will be responsible for both your and your employer’s contributions—plus 2%.

As with most things related to health insurance, there is no right or wrong answer. Whether COBRA is the best choice for you depends on your needs and circumstances. 

Can I Afford COBRA?

For some people, the cost of COBRA is just too expensive. 

The high cost of COBRA is often because your employer is the one who is responsible for covering most of the monthly premiums when you have job-based insurance.

A 2022 study from the Kaiser Family Foundation reported that employers pay an average of 83% of the cost of an employee’s health insurance. If family members are added, the employer still picks up around 73% of the total cost.

This makes coverage fairly affordable for most active employees and their families. However, there can be quite a “sticker shock” when the transition to COBRA happens, as the employer is no longer paying any part of the premiums. The exception would be if an employer offers a COBRA subsidy as part of a severance package. 

How COBRA Costs Are Determined 

If you are leaving your job, your human resources (HR) officer can tell you how much your COBRA premiums will be if you decide to continue coverage.

If you want to figure this out on your own, ask HR how much your employer is contributing toward your monthly coverage. Then, check your pay stub to see how much you’re contributing. 

After adding these figures, add another 2% (for the service fee).

This will show you exactly how much you’ll expect to pay for COBRA.

For example, say that you have $125 taken from each paycheck for health insurance. You get paid twice per month, so your portion of the monthly premiums is $250. 

If your employer contributes $400 per month, the total cost of your job-based plan is $650 per month.

To calculate your total monthly COBRA premium, add a 2% service charge to the $650 for a grand total of $663 per month.

Here’s a sample calculation:

  1. Your contribution: $125 per paycheck X 2 = $250 per month
  2. Your employer’s contribution: $400 per month
  3. Total contribution: $250 + $400 = $650 per month
  4. Service charge: $650 x 2% (or 0.02) = $13 per month
  5. COBRA premium: $650 + $13 = $663 per month

Changing From Family Plan to Single Plan

A single plan is easy to figure out with COBRA, but it gets more complicated if you need to switch from a family plan to a single plan. This might be necessary if you get divorced or turn 26 and are no longer eligible for coverage on your parent’s plan.

In these situations, an HR officer will look up the rate for single coverage on the same health plan that you are currently enrolled in. 

To calculate the COBRA cost, the HR officer will have to determine:

  • What would you have been contributing to an individual plan? If you are a family member (dependent), your contribution would typically be higher than the employee’s (primary member). In some cases, dependents are responsible for the entire amount if the employer does not contribute to family coverage.
  • What would the company you work for have been contributing toward the premium? If you are the employee (primary member), the amount should be clear. If you are a dependent, the contribution can vary (and sometimes be nothing at all) depending on the employer.

After adding these two figures, you would add another 2% to calculate your total COBRA premium costs.

How COBRA Affects Your Taxes

If you decide to continue your current health insurance with COBRA, there is another expense you might not be aware of: higher taxes.

While you’re employed, your insurance premium is deducted from your paycheck before taxes along with other pretax deductions such as your 401(k) retirement plan and group term life insurance. These deductions make your net income smaller and, by doing so, lower your income tax.

When you lose job-based health coverage and switch to COBRA, you have to pay your COBRA premiums with after-tax money. That means that you lose the tax-free benefit you got while being employed.

You might be able to deduct part or all of your COBRA premiums from your taxes—but not everybody is eligible for this deduction. It’s best to work with an accountant or tax advisor to find out for sure.

COBRA Alternatives

The individual health insurance market is an alternative to COBRA. Before the Affordable Care Act (ACA), it excluded pre-existing conditions. With the ACA, you can get health marketplace/exchange coverage regardless of your medical history. 

You can purchase coverage during the annual open enrollment period (November 1 to January 15 in most states), and at any time during the year when you have a special enrollment period triggered by a qualifying life event (QLE).

There are several QLEs that allow you to buy insurance in the marketplace, including:

  • Loss of existing health insurance
  • A change in your household (e.g., marriage, birth, or adoption)
  • A move to a new area where different health plans are available (assuming you already had coverage prior to the move)
  • A change in income (in some circumstances)5

Other qualifying events (e.g., obtaining U.S. citizenship or being released from a federal penitentiary)

If you have a QLE, you are allowed special enrollment in the marketplace and can purchase a plan that fits your budget and needs. 

Low- to middle-income enrollees often qualify for premium subsidies that can reduce their monthly premium cost to a more manageable amount—even $0 in some cases.

In the past, when an employer gave a subsidy to cover some of the cost of the first few months of COBRA, the end of that subsidy was not considered a qualifying event.

A new federal regulation allows for special enrollment in the marketplace starting in 2022 if a person loses an employer subsidy for COBRA.

Marketplace vs. Off-Exchange Plans

In addition to individual marketplace plans, you can look at off-exchange plans that might cost less than COBRA.

It is important to note that premium subsidies only apply to marketplace plans, not off-exchange plans. If you buy an off-exchange policy instead of COBRA, you’ll still be responsible for the entire cost of the coverage.


COBRA is a provision of a federal law that allows you to continue your current job-based health insurance for a set time after you lose or leave your job. COBRA gives you the option to continue that plan for at least 18 months.

However, COBRA can be costly. COBRA insurance can also affect your income taxes. If the cost of COBRA is not doable, you can often find lower-cost coverage on the health insurance marketplace.

Switching to an individual/family plan on or off the marketplace can mean you face higher out-of-pocket costs. You also may need to change providers.

Need Help?

The Department of Labor oversees COBRA compliance. They have a list of frequently asked questions about COBRA, which may be useful to you. You can also speak with someone at the agency by calling 866-487-2365.

If you need more information about the individual health insurance marketplace, you can call the 24-hour hotline at 1-800-318-2596.