COBRA or Marketplace After a Layoff
Priya, 52, was laid off from a 200-employee marketing firm. Her group PPO ends on March 31. COBRA costs $780/month with a $1,500 deductible and $6,000 out-of-pocket maximum; her endocrinologist and insulin pump supplies are in-network. A marketplace silver plan costs $620/month with a $4,500 deductible and $9,100 out-of-pocket maximum; her endocrinologist is in-network but the pump supplier is not. Priya has type 2 diabetes and hypertension; her medications cost about $3,800/year. She received a $30,000 severance payable in monthly installments through December and expects to start a new job in September at $85,000. She has 60 days to elect COBRA and 60 days for a special enrollment period. She asks whether she can try COBRA for a few months and then switch to the marketplace if the new job does not materialize.
1. Compare COBRA and the marketplace plan for Priya, including premium, cost-sharing, network, and subsidy considerations.
Read the worked answer
COBRA costs $9,360/year in premiums, with a $1,500 deductible and $6,000 out-of-pocket maximum. It preserves her current network, including the endocrinologist and pump supplier, which matters because diabetes supplies are recurring and not easily substituted. The marketplace plan costs $7,440/year in premiums but has a $4,500 deductible and $9,100 out-of-pocket maximum, and the pump supplier is out-of-network. That network gap could erase the premium savings if she pays out-of-network or switches suppliers. Priya may qualify for a premium tax credit on the marketplace based on her projected household income. Severance generally counts as income, and her new salary will affect the estimate. If she elects COBRA, she pays the full premium and cannot receive a subsidy for COBRA. The judgment call depends on her subsidy amount and how much she values continuity. If the subsidy makes the silver plan substantially cheaper and the pump supplier can be changed, the marketplace may win; if not, COBRA's lower deductible and network continuity may be worth the higher premium.
2. Can Priya elect COBRA now and switch to the marketplace later if the new job does not materialize?
Read the worked answer
She should not assume she can freely try COBRA and then switch. The 60-day marketplace special enrollment period is triggered by the loss of her group coverage on March 31. If she elects COBRA, she is not losing coverage for marketplace purposes, and voluntary dropout from COBRA is generally not a qualifying event. She could switch during the annual open enrollment period, or if she has a separate qualifying event such as losing COBRA because the employer stops offering it or because she exhausts COBRA. If she declines COBRA and enrolls in the marketplace during the special enrollment window, she can later drop the marketplace plan when she gains employer coverage. The safer planning approach is to decide now based on the subsidy estimate and network needs. If she wants the marketplace as a fallback, she should use the special enrollment period before it expires rather than elect COBRA and hope to switch later.
3. How does a new employer's 90-day waiting period affect her choice?
Read the worked answer
A 90-day waiting period means Priya may need coverage for up to three months after starting the new job before the employer plan begins. If she is on COBRA, she can keep COBRA until the employer coverage starts and then drop it; that avoids a gap. If she is on the marketplace plan, she can keep it until the employer coverage starts and then terminate it. The waiting period itself does not create a special enrollment opportunity, but gaining employer coverage is a qualifying event that lets her leave the marketplace or COBRA. The cost of bridging those 90 days should be included in the comparison. COBRA may be more expensive monthly but has a lower deductible; the marketplace may be cheaper monthly but has a higher deductible and the pump supplier issue. She should confirm whether the new employer's plan is minimum essential coverage and whether it is affordable under ACA rules, because that affects her marketplace subsidy eligibility if she stays on the marketplace after the job starts.