The first COBRA notice that lands in your mailbox reads like a bill. It is not one. How COBRA works, in the part almost nobody explains, is that the law hands you a stretch of up to 105 days in which you are covered if you want to be and owe nothing if you do not. Most people spend that window doing anxious arithmetic on a premium they may never have to pay. The number on the notice is alarming. For the first several weeks it is also entirely theoretical.
COBRA is your old plan with the subsidy stripped out
Nothing about the coverage itself changes when you elect COBRA. Same network, same deductible, same claims process. The deductible and out-of-pocket spending you have already racked up this year come with you too, because it is the same plan year on the same plan. What changes is who pays.
While you were employed, your employer was quietly covering most of the premium. KFF’s 2025 Employer Health Benefits Survey put the average annual premium for family coverage at $26,993, of which workers contributed $6,850. Single coverage averaged $9,325 with a worker share of $1,440. So the employee holding family coverage saw about $571 a month leave their paycheck while the plan was actually costing $2,249 a month.
COBRA lets you keep the plan and hands you the whole bill, plus up to 2% for administration. That 102% figure gets a lot of attention, and it is the least important part of the increase. Two percent of $2,249 is $45. The other $1,678 is the employer contribution that simply stopped. Your family premium goes from roughly $571 a month to $2,294, a little more than four times what you were used to seeing. On single coverage the jump is proportionally worse: from about $120 a month to $793, because employers cover a larger share of single coverage.
What COBRA costs is not a penalty. It is the true price of the coverage, visible for the first time because the employer stopped standing in front of it. Which is worth sitting with for a second: if you have employer coverage right now, $2,249 a month is roughly what it costs, and you have been seeing a quarter of it.
How COBRA works as an option rather than a purchase
Once your employer notifies the plan of a qualifying event, the plan administrator has 44 days to send you an election notice. From the later of your coverage end date or the date that notice goes out, you get 60 days to elect. If you elect, you then get 45 days to make the first payment.
Coverage does not begin until that first payment is made, and when it is made, it reaches backward to the day your job-based coverage ended. The Department of Labor states this plainly in its COBRA guidance for workers: because coverage is retroactive to the day you lost your plan, your initial payment may cover more than one month, and you have 45 days to pay it.
Put those two clocks end to end. Sixty days to decide plus 45 days to pay means up to 105 days can pass between losing coverage and owing a dollar. During that stretch you are not uninsured in any meaningful financial sense. You are holding a claim on your old plan that you can exercise or let expire. Break an ankle on day 30, elect on day 35, pay by day 80, and the plan processes the ankle. Stay healthy through day 104, let the window close, and the entire thing cost you nothing.
Almost everything written about COBRA treats those 60 days as a deadline bearing down on an expensive decision. The structure says the opposite. The deadline is on the paperwork, not on the money, and the decision is one you are allowed to defer while staying protected.
One caution keeps this from being a loophole. If you affirmatively waive COBRA in writing and later change your mind inside the 60 days, the Labor Department notes that coverage may start on the date you revoke the waiver rather than reaching back to when your coverage ended, depending on plan terms. Silence preserves the retroactivity. Signing the waiver may not. So do not send the form back marked “decline” just to be tidy.
You can buy COBRA by the month
The payment terms contain a second rule that almost nobody uses. You are allowed to pay for only the months you actually want covered. Plans must accept monthly payments after the initial one, and every payment after the first carries a 30-day grace period.
So COBRA can be bought in slices. A worker starting a new job on November 1 with benefits that begin December 1 does not need to commit to 18 months of anything. Elect, pay for September, October and November, stop. The catch is administrative in both directions. Your plan is not required to send you a bill, so a missed due date because nothing showed up in the mail is entirely your problem. And a provider checking your eligibility during the unpaid gap will see an inactive member, which in practice can mean paying cash at the desk and waiting for the claim to be reprocessed once your premium posts.
There is also a funding source most people forget they are sitting on. COBRA premiums are one of the few insurance premiums the tax code lets you pay straight out of a health savings account, so a balance you built up while employed can cover the bridge without touching cash. If you are not sure what qualifies, how HSAs work covers the distribution rules.
How long the option runs depends on why you lost coverage. Job loss or a cut in hours gives you 18 months. Divorce, the death of the covered employee, or a child aging off the plan gives dependents 36. A Social Security disability determination issued before the 60th day of coverage extends the 18 months to 29, and for those extra 11 months the plan may charge up to 150% of the premium rather than 102%.
The 2026 subsidy change made the comparison harder
Knowing you can defer the decision only helps if you use the time to price the alternative, and that alternative moved sharply in the past two years. For a decade the advice was simple: the Marketplace will be cheaper, so take it. The enhanced premium tax credits that expired at the end of 2025 are what made that reliably true, and their expiration is why the calculation now has to be run rather than assumed.
The Peterson-KFF Health System Tracker’s analysis of 2027 rate filings, updated in August 2026, found a median proposed increase of 15% across 276 Marketplace insurers, following a 2026 in which the median finalized increase was 20% and benchmark silver premiums climbed 26%. Two consecutive years of double-digit increases means typical Marketplace premiums will have risen by more than a third over that stretch.
The households feeling it most are the ones just above four times the federal poverty level, who lost subsidy eligibility entirely when the enhanced credits lapsed. The researchers tracked one: a 40-year-old in Indianapolis earning $65,000 on an Anthem silver plan paid $316 a month in 2025 with enhanced credits, $477 in 2026 after they expired, and would pay $546 in 2027 if the filed rates hold. That is a 41% increase in two years for the same coverage.
None of this makes COBRA cheap. At $2,294 a month, family COBRA remains far more expensive than almost any Marketplace plan. But for a single filer above the subsidy threshold, comparing an unsubsidized silver plan with a fresh deductible against a familiar plan where the year’s deductible is already partly met is no longer the obvious call it was in 2023. If you have already spent down an out-of-pocket maximum this year, how that maximum works is often the deciding number, not the premium.
Where the window closes
Two deadlines run at once, and confusing them is the expensive mistake. Losing job-based coverage opens a 60-day special enrollment period on the Marketplace. It also opens the 60-day COBRA election period. Electing COBRA does not forfeit your Marketplace rights, but voluntarily dropping COBRA in the middle of a year does not open a new special enrollment period. You would wait for open enrollment, which for 2027 coverage runs from November 1, 2026 through January 15, 2027. Exhausting COBRA or having an employer stop contributing to it does qualify you.
How COBRA works is closer to a free option with an expiration date than to a plan you sign up for. That changes what you do on the day the notice arrives. Do not sign it, do not decline it, and do not panic at the premium. Put the 60th day on a calendar and spend the time pricing the alternatives. Deciding early costs you the option and helps nobody but the plan administrator.