The 102% Rule — Why You Pay More Than the Premium
Under COBRA, you're responsible for the full cost of your health insurance premium — including the portion your employer used to pay — plus a 2% administrative fee. This means you pay 102% of the total plan cost.
For most workers, this is a significant shock. While employed, you may have been paying only 20–30% of the total premium (with your employer covering the rest). Under COBRA, you see — and pay — the full amount. A plan that cost you $200/month as an employee might cost $650–$900/month under COBRA.
Federal COBRA vs. State Mini-COBRA
There are two separate legal frameworks for continuation coverage, and which one applies to you depends entirely on your former employer's size:
Federal COBRA (20+ Employees)
The federal Consolidated Omnibus Budget Reconciliation Act of 1985 requires employers with 20 or more employees to offer continuation coverage. Key rules:
- Duration: Up to 18 months for job loss or reduced hours. Up to 36 months for dependents losing coverage due to divorce, death of the employee, or Medicare eligibility.
- Cost: 102% of the full group premium (employee + employer shares + 2% admin fee).
- Election window: You have 60 days from the qualifying event (or notification date) to elect COBRA.
- Coverage: Must be identical to the plan offered to active employees.
State Mini-COBRA (Under 20 Employees)
Many states have enacted their own continuation-coverage laws — often called "Mini-COBRA" — that apply to employers too small to fall under the federal law. However, these laws vary widely:
| State | Max Duration | Notes |
|---|---|---|
| California | 36 months | Cal-COBRA — longest in the nation |
| New York | 36 months | Matches California's duration |
| Florida | 18 months | Matches federal duration |
| New Jersey | 18 months | Matches federal duration |
| North Carolina | 18 months | Matches federal duration |
| Illinois | 12 months | Shorter than federal |
| Texas | 9 months | Limited duration |
| Pennsylvania | 9 months | Limited duration |
| Georgia | 3 months | Shortest Mini-COBRA |
| Michigan | 0 months | No state-level continuation law |
Why the ACA Marketplace Is Often Cheaper Than COBRA
Many people automatically elect COBRA without comparing it to ACA Marketplace options. This can be a costly mistake. Here's why:
- Subsidies: If your income qualifies (under 400% FPL in 2026), ACA premium tax credits can dramatically reduce your monthly cost — often to less than half of what COBRA charges.
- Special Enrollment Period: Losing employer-sponsored coverage is a qualifying life event, granting you a 60-day window to enroll in a Marketplace plan outside of open enrollment.
- Plan flexibility: COBRA locks you into your former employer's plan. The Marketplace lets you shop for a plan that better fits your current needs and budget.
- Cost-sharing reductions: If you earn between 100–250% FPL and choose a Silver plan, you may also qualify for lower deductibles and copays.
Rule of thumb: Always get a Marketplace quote at Healthcare.gov before deciding on COBRA. You can elect COBRA retroactively within the 60-day window if the Marketplace option doesn't work out.
Frequently Asked Questions
Can I switch from COBRA to a Marketplace plan?
Not easily. Voluntarily dropping COBRA mid-year is not a qualifying life event for Special Enrollment on the Marketplace. You would typically need to wait for the next Open Enrollment Period. That's why it's important to compare both options before electing COBRA.
Does COBRA cover dental and vision?
Yes — if dental and vision were part of your employer's group plan, COBRA continuation must offer the same coverage. You can elect COBRA for medical only, dental only, or all plans that were available to you.
What if I get a new job with benefits during COBRA?
Enrolling in a new employer's group health plan is a valid reason to end COBRA coverage. However, COBRA cannot deny you coverage because you have a new job — only the new employer plan enrollment terminates COBRA.