What’s the Difference Between COBRA and Obamacare? 

COBRA (Consolidated Omnibus Budget Reconciliation Act) and Obamacare (Affordable Care Act) are both related to health insurance but serve different purposes:

• COBRA: Provides individuals who lose their job-based health insurance (due to job loss, reduction in hours, etc.) the option to continue their existing employer’s group health plan for a limited period. This is often more expensive as the individual pays the full premium, including the share previously paid by the employer.
• Obamacare: Refers to the Affordable Care Act, which expanded access to health insurance through various means, including marketplaces for individual insurance plans, subsidies for low-income individuals, and Medicaid expansion. It aims to make health insurance more affordable and accessible to a larger portion of the population, rather than being tied to employment.

In summary, COBRA offers a temporary continuation of an individual’s existing employer-based health plan, while Obamacare provides broader access to health insurance through various channels, often with a focus on affordability.

Can You Keep Your Health Insurance if You Leave Your Job? 

Yes, COBRA allows you to keep your employer-provided group health plan if you lose your job or quit. However, your previous employer will not continue to subsidize your plan.

But COBRA is not the only option for health coverage if you leave a job. Losing employer-sponsored health insurance triggers a 60-day Special Enrollment Period, during which you can apply for an ACA plan.  

COBRA vs. Obamacare 

	Obamacare	COBRA
Available to Unemployed Individuals	Yes	Yes
Continuation of Group Healthcare Plan	No	Yes
Average Premium	$456/mo	Average single coverage: $659/mo; family coverage: $1,871/mo (Keiser Family Foundation)
Length of Coverage	One year, renewable	18-36 months, nonrenewable
Government Subsidies Available?	Yes	No
Enrollment Period	Open Enrollment, Special Enrollment Period	Usually within 60 days of leaving a job
Length of Enrollment Period	One year	18-36 months
Purchased Through the Marketplace?	Yes	No
Types of Coverage Available	Varied, including basic to more comprehensive, along with catastrophic plans	Same health plan you had through your employer; some choices may be available during open enrollment
Continuation of Prescription Drug Benefits?	Depends	Yes

In general, both COBRA and Obamacare are available to those who are unemployed. COBRA allows you to keep the same group health plan for some time after a job loss. Obamacare allows you to obtain new health coverage after losing employer-sponsored health insurance. 

You’ll likely pay far more in monthly premiums through COBRA than you would for an ACA plan. Obamacare health plans may offer subsidies to help reduce your costs, or you might choose a more minimalist plan. 

If you use COBRA and your former employer offers various plan options, you will not be able to switch plans until Open Enrollment.

Understanding Obamacare

What we know as “Obamacare” results from the Patient Protection and Affordable Care Act, signed into law on March 23, 2010. The ACA broadened access to health insurance coverage by using coverage subsidies, new consumer protections, and online tools to compare and choose plans. 

ACA-compliant plans vary in coverage details and pricing levels, but all provide a similar level of basic coverage and include consumer protections designed to limit out-of-pocket expenses. 

Obamacare aimed to address longstanding obstacles to health insurance. ACA-compliant plans must meet standardized coverage requirements for:

• Dependent children up to age 26
• Preventive care without requiring deductibles, copays, or coinsurance
• People with pre-existing conditions 

In addition, ACA plans do not feature annual or lifetime dollar limits, which limit how much an insurer would spend on medical claims. 

Eligibility 

Eligibility for Obamacare depends on U.S. residency or citizenship status. You are not eligible for Obamacare if you’re incarcerated or already eligible for Medicare.

Understanding COBRA

The Consolidated Omnibus Budget Reconciliation Act ensures people who leave their jobs can still retain their job-based health coverage. COBRA allows you to keep the same group health insurance plan, even if you’re no longer working for the providing employer. 

Qualifying events that allow someone to use COBRA include:

• A covered employee quitting, being laid off, getting fired, or receiving reduced hours 
• A spouse divorcing or legally separating from the covered employee
• A covered employee becoming eligible for Medicare 
• A child or dependent losing coverage due to the covered employee’s death
• A child who turns 26 and no longer qualifies for coverage under their parent’s plan

Eligibility 

In general, COBRA applies to you if: 

• You were already covered under an employer-provided group health plan before leaving their job
• You were employed by a state or local government or a private-sector employer with at least 20 employees
• You’ve experienced a qualifying event, such as losing employer-sponsored health insurance, having your work hours reduced, or being terminated (for a qualifying reason) 
• You received coverage through a related covered employee but lost it due to death, divorce, or loss of dependent child status

Comparing Your Options 

When deciding between an ACA plan and continuing your current coverage with COBRA, consider the following features of each.

Premiums and Subsidies 

Most employers subsidize the cost of employer-sponsored health insurance. A generous employer might even pay for part or all of your COBRA premiums, but this is uncommon. In most cases, if you continue coverage through COBRA, you’ll need to pay the entire premium, including what your employer used to pay, plus a 2% fee. This will likely be more expensive than your original employer-sponsored plan.

On the other hand, under Obamacare, premium prices vary depending on the plan and the insured’s income level. Catastrophic plans, typically available to young, income-qualifying people, may have lower premium prices but offer limited coverage. Lower-income people can also use subsidies or qualify for Medicaid, a government-sponsored program that offers low-cost health coverage to Americans who demonstrate financial need.

Out-of-Pocket Costs 

COBRA and Obamacare plans typically have varying deductibles, copayments, and coinsurance requirements. Some ACA plans have very low deductibles and cost-sharing but charge more in premiums. For both COBRA and Obamacare, in-network services generally cost less than out-of-network services.

When deciding between COBRA vs. Obamacare, consider the time of year and whether you’ve already met your plan’s deductible. If it’s halfway through the year and you’ve already met your group health plan’s deductible, it might be cheaper to stay on your plan through COBRA than it would be to start over with a new plan and deductible. 

However, Obamacare plans fully cover preventive services without charging a copay or coinsurance. This can decrease your costs for preventive care, particularly as you age. 

Length of Coverage 

ACA plans typically last for one year at a time, with the option to renew or switch plans during Open Enrollment, which lasts from November through mid-December.

COBRA coverage usually lasts 18 to 36 months. You might be able to qualify for a longer period in some cases, such as a new qualifying event, or if you’ve lost coverage due to divorce, separation, or aging out of a parent’s health coverage.  

After your COBRA coverage expires, you must find another health insurance option. So it’s wise to start seeking new coverage before your COBRA plan ends, either through a new employer, Medicaid, or purchasing an individual Marketplace plan.

Enrollment Periods

The ACA Marketplace Open Enrollment Period typically runs from November through December, during which you can sign up for a new plan. However, job loss qualifies you for a Special Enrollment Period, which allows you to enroll in a new health plan outside of Open Enrollment.

With COBRA, you or your employer lets your health plan know of the qualifying event, such as job loss or reduced hours. Then, the health plan will send you a notice. You’ll have 60 days to respond to the notice if you want to continue coverage with COBRA. 

Which Should You Choose? 

For some people, continuing coverage under COBRA is a wise decision, even if the plan costs more than the prior employer-sponsored plan or an alternative ACA plan. For others, ACA plans are the better option. Here’s how to choose.

Consider COBRA If…

• You’re leaving a job: Whether you quit or were laid off, COBRA can help ease the shock of searching for a new plan while unemployed. If you’re simply between jobs and waiting for your next job’s healthcare plan to kick in, COBRA can help cover the gap. 
• You’re a covered employee’s dependent: Dependents who lost coverage under an employee’s plan can access COBRA coverage even if a sudden death or divorce occurs. 
• You rely on your doctor-patient relationship: Suppose you have established relationships with a specific network of doctors and healthcare facilities. If you need care, you will not need to cancel appointments or start searching for a new doctor if you continue coverage under COBRA.

Consider Obamacare If… 

• You want to pay less: Subsidies and financial assistance help lower-income individuals and families afford ACA plans. Applying for Obamacare can also help determine your eligibility for Medicaid. In addition, you may qualify for very affordable ACA options such as catastrophic coverage, particularly if you’re lower income or young.
• You’re self-employed or otherwise not planning to seek employer-sponsored coverage: Obamacare offers coverage if you work part time, own your own business, or work for a small business without benefits.
• You’re seeking essential and preventive health benefits: ACA plans require coverage of essential health benefits and ensure full coverage of preventive care, which can save you money in the long run.

Advantages

COBRA and ACA plans typically cover preexisting conditions and provide robust health benefits at affordable prices. Consider the below when choosing between the two.  

COBRA 

• See existing providers: Your COBRA plan offers the same doctors, specialists, and healthcare providers as your previous employer-sponsored insurance plan. 
• Medical care continues: You’ll typically get the same benefits and services as before your job loss. Your established appointments or procedures can continue, which may prove vital for dealing with a chronic or acute condition or disease. For example, switching plans halfway through pregnancy or cancer treatment could be complicated.
• Already contributed to a deductible: You may have already met your deductible, which leads to the plan covering more costs.
• Easier transition: While using COBRA as a temporary bridge between employer-sponsored health insurance and exploring other options, you have time to find new, high-quality coverage you can afford. 

Obamacare 

• Essential health benefits: All Obamacare plans offer essential health benefits, including hospitalization, prescription drugs, maternity care, and mental health services.
• Financial assistance: Obamacare subsidies and financial aid include premium tax credits based on income, along with lower monthly premiums and cost-sharing reductions if you’re eligible. 
• Affordable options: ACA plans average $456 a month for a 40-year-old beneficiary, less than COBRA plans, which can cost around $700 a month.
• Preventive care coverage: Obamacare plans cover certain preventive services and medications without charging a copayment or coinsurance, which may differ from your group health insurance plan.

Disadvantages 

While both COBRA and ACA plans offer advantages, each plan type can have its drawbacks. Consider the challenges of each. 

COBRA 

• Expensive: COBRA coverage can be costly, particularly for families, as beneficiaries could be required to pay the full premium amount plus 2%.
• No subsidies: You’ll pay COBRA’s full premium amount without financial assistance, such as subsidies or tax credits.
• Limited period and control: Depending on the qualifying event, you’ll typically only get between 18 and 36 months of COBRA coverage. You might be unable to switch to a different plan, though some employers may allow you.
• May not apply: COBRA does not apply to plans sponsored by the federal government, churches, or certain church-related organizations. Your COBRA coverage could be discontinued if your employer goes out of business, stops offering health insurance, or ends its group health plan.

Obamacare 

• Limited Plan Choices: In some regions, you may find few insurance providers or plans through the Health Insurance Marketplace. 
• Paperwork: Applying for a plan will require a chunk of time as you navigate the website, supply income and family information, and try to understand the benefits and exclusions of each plan. Using a licensed agent to shop for plans can simplify the process.
• Uncertainty: Various aspects of the ACA are frequently challenged, politically and legally. Currently, no-cost preventive drugs and health services may be under threat in court.
• No immediate coverage: If you’re laid off mid-month, your ACA plan will not start until the first of the following month. Your current health coverage may or may not last through month’s end.

How To Get COBRA

1. The group health plan is notified of the qualifying event in one of the following ways:
   • Your employer tells the plan within 30 days if the qualifying event is termination, a reduction in hours, a covered employee’s death, Medicare entitlement, or the employer’s bankruptcy.
   • You (or the covered employee) must notify the plan within 60 days if the qualifying event is a divorce, legal separation, or a child’s loss of dependent status. 
2. Within 14 days of receiving the qualifying event notice, the plan administrator sends you an election notice describing your continuation coverage rights and further information.
3. You’re given an election period of at least 60 days to choose whether you want continuation coverage.
4. Make your initial premium payment within 45 days after the date you mail in your election form. If you do not make any payment, you could lose COBRA. Continue making monthly payments until you get coverage elsewhere or your COBRA expires.

How To Get Obamacare

States administer ACA plans, so enrollment instructions differ based on where you live. However, in all cases, you will follow the general process below:

1. Check the enrollment period:
   1. Sign up during open enrollment (November through December). 
   2. If you’ve lost your job, you can enroll during your subsequent Special Enrollment Period. 
   3. If you suspect you or your family members might qualify for Medicaid due to a reduced income, you can apply for Medicaid and CHIP any time of the year. 
2. Fill out paperwork, which may be time-consuming. You can also speak with a licensed agent to help you get the paperwork done. 
3. Shop for plans. Based on your responses, the Health Insurance Marketplace will show you various plans you qualify for. In some markets, you may have dozens of options. 
4. Pay your premium. Your coverage begins after you’ve paid your monthly premium directly to the insurance company. 

Alternatives to COBRA and Obamacare

There are many alternatives to COBRA and ACA, such as Medicare, association healthcare plans, individual healthcare plans, or a Health Savings Account (HSA) with a High Deductible Health Plan (HDHP). Beyond those options, consider the following alternatives. But factor in that you may need to switch providers and could potentially lose coverage.

Medicaid 

If you apply through the Health Insurance Marketplace, you may be eligible for Medicaid, which provides low-cost or free health insurance to low-income individuals and families. You could meet Medicaid’s income-based eligibility requirements after a job loss.

Eligibility requirements are set state by state, so Medicaid may be available to you if you are pregnant, have a disability, or are older with few financial resources. Services include preventive care, hospitalization, mental healthcare, and prescription drug coverage. However, enrollment and re-enrollment requirements depend on your state.

Short-Term Health Insurance 

Short-term health insurance can be an alternative to COBRA and Obamacare if you only need coverage for a few months. These plans are usually affordable but offer limited coverage and do not meet ACA requirements.

For example, pre-existing conditions may be excluded from short-term health insurance coverage, and lifetime limits may prevent all your bills from being paid. Short-term plans typically last just a few months and may be able to be renewed, not for more than three years, according to federal law. Renewal requirements differ by state.

Group Health Insurance

Group health insurance is an employer-provided plan covering medical care for employees and their families. This group insurance could be through a health maintenance organization, an insurance plan, or even paid by the employer. This coverage may be more affordable than COBRA or an ACA plan.

You may qualify for group health insurance under your domestic partner, your spouse, or a parent’s employer-sponsored plan. If you or your dependents lost your current eligibility for group health coverage, you may qualify for the group health plan’s special enrollment period. 

Can You Switch to Obamacare if You Signed Up for COBRA?

Yes, you can. You can switch to an ACA plan if any of the following apply: 

• Your COBRA coverage is expiring
• You enroll during Open Enrollment
• You qualify for a Special Enrollment Period

However, if you end your COBRA continuation coverage early and none of the above apply, you’ll experience a challenge. You must purchase short-term insurance or wait until the Marketplace’s next open enrollment period for a new group health plan.

What This Means for You 

In short, COBRA may offer reassurance and continuity of your insurance plan. This may be critical if you think you’ll only be between jobs for a little while or if you want to continue ongoing medical treatments without interruption. COBRA could be a good option if you want to take time to compare plans, medical and pharmaceutical coverage options, and total costs before committing to an insurer.

Obamacare can be a better option for those who are young and do not have many healthcare needs. An ACA plan can also be a fit for someone undergoing a sudden budgetary shock due to a layoff, a termination, reduced hours, or a covered employee’s death. If you have more bills than income at month’s end, drastic cuts may be necessary, without exposing you to potential economic fallout. The Marketplace may offer subsidies, Medicaid, or catastrophic plans that fit your new budget.