COBRA and Continuation Coverage

When you leave a job, you don't necessarily lose health insurance the same day. COBRA lets you keep your employer's exact plan for a while — but you pay the whole bill yourself.

Here's the honest version: COBRA is expensive by design, and the marketplace is usually cheaper for most people. COBRA makes sense in specific situations. Know which one you're in before you sign up.

What COBRA actually is

Federal law (COBRA — the Consolidated Omnibus Budget Reconciliation Act) lets you temporarily keep the group health plan you had through your employer after a "qualifying event":

• You lose or leave your job (voluntary or involuntary, as long as it wasn't gross misconduct)
• Your hours are cut so you're no longer eligible for the group plan
• Your spouse or dependent children lose coverage because of your job loss, your death, divorce, or a child aging off the plan

You generally qualify if your employer had 20 or more employees. Smaller employers sometimes offer state continuation coverage instead, but Tennessee doesn't have a state "mini-COBRA" — so if your employer was under 20 people, ask them directly whether any continuation option exists, because there may not be one.

How long it lasts and what it costs

Duration: typically 18 months after your qualifying event. Certain situations (like disability determinations or second qualifying events) can extend that, but 18 months is the standard expectation.

Cost: you pay the full premium — your old share plus the employer's old share — plus up to a 2% administrative fee. That means the premium you see on your COBRA election notice is often three to four times what was coming out of your paycheck. The sticker shock is the number-one reason people decline COBRA, and the shock is usually justified.

When COBRA beats the marketplace

• You're mid-treatment with specific doctors. COBRA keeps your exact plan, your exact network, your exact deductibles as they stood. No new network to learn, no interrupted care.
• It's a short gap. New job starts in two months with good coverage? COBRA bridges that gap with zero disruption.
• You've already spent toward the deductible. If you've racked up thousands in medical costs this year, switching to a new plan that resets your deductible could cost more than COBRA's premium.

When the marketplace is the better deal

For most people, it is. If your income qualifies you for premium tax credits on HealthCare.gov, a subsidized marketplace premium almost always beats full-price COBRA — sometimes by hundreds of dollars a month. Note: with the enhanced credits expired (see Subsidies in Tennessee for 2027), credits now run only up to 400% of the federal poverty level, so do the math for your own situation.

Also know: voluntarily dropping COBRA doesn't trigger a special enrollment period. If you take COBRA and then quit paying for it mid-year, you generally can't jump to the marketplace until open enrollment. (Losing COBRA involuntarily — including when it runs out — does trigger a SEP.)

Leaving a job: you can choose the marketplace even if COBRA is offered

Being offered COBRA doesn't take away your right to a marketplace special enrollment period. Losing job-based coverage opens one either way.

• Your window starts 60 days before your coverage ends. If you pick a marketplace plan by the last day of your old coverage, the new plan starts the first day of the next month, with no gap.
• You also get 60 days after it ends. If you enroll after your job coverage ends, the marketplace plan starts the first of the month after you pick it, which can leave a gap.
• COBRA can fill that gap. You usually have 60 days to elect COBRA, and coverage is retroactive to the day your job coverage ended. People sometimes elect COBRA only for a gap month, but you must pay the premium for any month you keep.
• Electing COBRA doesn't use up your special enrollment period. You keep the full 60-day window that started when your job coverage ended. But after that window closes, voluntarily dropping COBRA does not open a new one. You'd wait for open enrollment, or until COBRA runs out.
• Tax credits only come with marketplace plans. You can't use a premium tax credit to pay for COBRA. If you qualify for a credit, compare COBRA's full price against the after-credit marketplace price.
• Switching resets your deductible. A new marketplace plan starts your deductible and out-of-pocket spending over at $0. If you've already spent a lot this year, staying on COBRA until December 31 and switching to a marketplace plan for January 1 during open enrollment (November 1 – December 15 for a January 1 start) can cost less.

Going self-employed? Your marketplace tax credit is based on your expected net self-employment income for the year. Self-employed guide.

Don't let coverage lapse without a plan

This is the real risk with COBRA: the 18 months tick by quietly, and then your coverage ends. Losing or exhausting COBRA is a qualifying event for a 60-day special enrollment period on the marketplace — but only if you enroll within the window. Mark the end date the day you elect COBRA.

Frequently asked questions

I'm leaving my job and was offered COBRA. Can I get a marketplace plan instead? Yes. Losing job-based coverage opens a 60-day special enrollment period whether or not COBRA is offered. You can apply up to 60 days before your coverage ends; pick a plan by your last day of coverage and the new plan starts the first of the next month.

If I elect COBRA, can I switch to the marketplace later? Within 60 days of losing your job coverage, yes. After that, voluntarily dropping COBRA doesn't open a special enrollment period. You can switch during open enrollment, or when COBRA runs out.

Can I use a premium tax credit for COBRA? No. Marketplace tax credits only apply to plans bought through HealthCare.gov.

How long does COBRA last? Generally 18 months after the qualifying event. Certain situations — a disability determination, or a second qualifying event like divorce during the COBRA period — can extend coverage, but 18 months is the standard case.

Do I pay the full premium for COBRA? Yes. You pay the entire premium (your share plus the employer's former share) plus up to a 2% administrative fee. That's why COBRA premiums are often three to four times what you were paying out of your paycheck.

Is COBRA cheaper than a marketplace plan? Usually no. If you qualify for premium tax credits, a subsidized marketplace plan is almost always cheaper than full-price COBRA. COBRA's edge is continuity — same doctors, same plan, same deductible progress — which matters most mid-treatment or during short coverage gaps.

What happens when my COBRA runs out? Losing COBRA coverage — including when it expires at 18 months — is a qualifying life event that opens a 60-day special enrollment period to enroll in a marketplace plan. Don't miss the window.

I'm turning 26 and aging off my parent's plan. Should I take COBRA or get my own plan? Aging off a parent's plan triggers a special enrollment period for your own marketplace plan. COBRA may be offered, but for most 26-year-olds a marketplace plan with tax credits (if income-eligible) is far cheaper. See Turning 26.

Sources

• U.S. Department of Labor — Employee Benefits Security Administration: COBRA Continuation Coverage guidance
• Healthcare.gov — COBRA coverage and losing job-based coverage
• 45 CFR 155.420 and CMS's 2016 rule change — loss of job-based coverage opens a special enrollment period even when COBRA is offered; electing COBRA doesn't end the 60-day window; voluntarily ending COBRA later is not a qualifying event
• DOL — 60-day COBRA election period with coverage retroactive to the loss of coverage

Your next step: If COBRA feels right, elect it — then put your coverage end date on a calendar. If price is the deciding factor, compare subsidized marketplace plans at The Marketplace or check what financial help you qualify for at Subsidies in Tennessee for 2027.