Losing job-based health insurance can feel overwhelming, especially if it happens unexpectedly or you retire before qualifying for Medicare. Suddenly, you’re left wondering how to cover medical expenses and what options are available to bridge the gap. Two of the most common solutions are COBRA continuation coverage and short-term health insurance. Both offer benefits and drawbacks, and the right choice depends on your health needs, budget, and how long you need coverage.
Understanding COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows eligible employees to keep their workplace health insurance for a limited period after job loss, reduced hours, or retirement—typically if the employer has at least 20 employees.
- Duration: Usually up to 18 months, sometimes extended to 36 months under certain conditions.
- Coverage: Identical to the plan you had while working.
- Cost: You’re responsible for the entire premium (both your share and your employer’s contribution), plus an administrative fee of up to 2%.
For example, if your employer had been covering the majority of your premium, you may suddenly face paying the full cost out of pocket—often hundreds more than before.
Short-Term Health Insurance Explained
Short-term health plans are designed to provide temporary coverage, usually when you’re between jobs, waiting for new insurance to start, or bridging the gap until Medicare or ACA marketplace enrollment.
- Duration: Generally 30 days to 12 months, with renewal options depending on state laws.
- Coverage: Emergency services, hospital care, and some doctor visits are typically included, but pre-existing conditions, maternity care, mental health, and preventive services are often excluded.
- Cost: Monthly premiums are significantly lower than COBRA, but higher deductibles and out-of-pocket expenses are common.
For instance, a healthy individual may find a short-term plan for a fraction of the cost of COBRA, though the coverage is far less comprehensive.
Comparing COBRA and Short-Term Plans
| Feature | COBRA | Short-Term Plans |
|---|---|---|
| Coverage | Full, same as employer plan | Limited, often excludes pre-existing conditions |
| Cost | High premiums (entire cost + fees) | Lower monthly cost |
| Eligibility | Available after job loss, reduced hours, or retirement | Available year-round in most states |
| Duration | 18–36 months | 30 days–12 months (sometimes renewable) |
| Best For | People with chronic conditions or ongoing treatment needs | Healthy individuals seeking affordable short-term coverage |
Pros and Cons
COBRA Benefits
- Comprehensive coverage identical to your job-based plan
- Continuity of care with your existing doctors and prescriptions
- Valuable if you’re managing ongoing treatment or pre-existing conditions
COBRA Drawbacks
- Significantly more expensive than what you paid as an employee
- Limited duration—coverage eventually ends
- Only available if your employer qualifies under COBRA rules
Short-Term Plan Benefits
- Much cheaper monthly premiums
- Flexible enrollment options—you can apply any time
- Useful as a stopgap between jobs or before Medicare/ACA coverage
Short-Term Plan Drawbacks
- No coverage for pre-existing conditions
- Excludes many essential health benefits
- Higher deductibles and greater out-of-pocket risks
Common Questions
Can I switch from COBRA to an ACA marketplace plan?
Yes, but only during the annual open enrollment window or if you qualify for a special enrollment period.
What if I retire early before Medicare eligibility?
COBRA may cover you temporarily, but you’ll need to explore ACA marketplace plans or other long-term solutions once COBRA ends.
Is short-term insurance ACA-compliant?
No. These plans do not meet Affordable Care Act requirements, so they cover fewer services and protections.
Choosing What’s Best for You
When weighing COBRA against short-term insurance, consider:
- Health Needs: Ongoing treatments, prescriptions, and specialist visits may make COBRA a safer choice.
- Budget: If COBRA premiums are unaffordable, a short-term plan may provide a lower-cost alternative.
- Timing: If ACA open enrollment is near, a short-term plan could serve as temporary coverage.
- Future Plans: Retirees may benefit from COBRA until Medicare begins, while job seekers might prefer cheaper short-term protection.
Checklist before deciding:
- Compare monthly premiums and deductibles
- Review coverage details and exclusions
- Confirm whether your current doctors are included
- Consider how long you’ll need the plan
Bottom Line
COBRA delivers full coverage but at a steep price, making it most useful for people with significant or ongoing medical needs. Short-term health plans, while more affordable, offer limited benefits and exclude pre-existing conditions—better suited for healthy individuals who only need temporary coverage.
Whichever option you choose, avoid going without insurance. Even a short lapse in coverage can expose you to overwhelming medical costs. Take the time to compare COBRA, short-term plans, and ACA marketplace options to find the solution that best supports your health and finances.
