If you retire before age 65 (when Medicare starts), you need health insurance. The two main options are COBRA (continuing your employer's plan) and ACA Marketplace (ObamaCare). This guide compares both options to help you choose.
đĄ Key Fact: 57% of early retirees choose ACA over COBRA because of premium subsidies (KFF 2025 survey).
What is COBRA?
COBRA (Consolidated Omnibus Budget Reconciliation Act) allows you to keep your employer's health plan after leaving your job. You pay the full premium (including the portion your employer used to pay) plus a 2% administrative fee.
COBRA Coverage Period:
- Most people: 18 months
- Disabled beneficiaries: up to 29 months
- Dependents (after employee dies/divorces): up to 36 months
Cost Example: If your employer's plan costs $6,000/year (with employer paying $4,800), COBRA costs you $6,120/year ($6,000 + 2% fee).
What is ACA Marketplace (ObamaCare)?
The ACA Marketplace (HealthCare.gov or state exchanges) offers private health plans with premium tax subsidies for households earning 100%-400% of the Federal Poverty Level (FPL).
2026 Federal Poverty Level (FPL) Thresholds:
| Household Size | 100% FPL | 400% FPL |
|---|---|---|
| 1 person | $15,650 | $62,600 |
| 2 people | $21,870 | $87,480 |
| 3 people | $28,090 | $112,360 |
| 4 people | $34,310 | $137,240 |
Source: HealthCare.gov
COBRA vs ACA: Side-by-Side Comparison
| Factor | COBRA | ACA Marketplace |
|---|---|---|
| Monthly Premium | Full employer plan cost + 2% | Varies; subsidies available |
| Subsidies | â None | â Premium tax credits |
| Coverage Network | Same as employer plan | Varies by plan (HMO/PPO) |
| Pre-existing Conditions | â Covered | â Covered (ACA rule) |
| Enrollment Deadline | 60 days after job loss | Nov 1 - Jan 15 (Open Enrollment) |
| Best For | Short gap (â¤18 months) | Long-term (until Medicare) |
Real Cost Comparison (2026)
Scenario: Married couple (ages 62 & 60), no employer coverage available.
Option A: COBRA
- Employer plan cost: $1,200/month
- COBRA cost: $1,224/month ($14,688/year)
- Total for 18 months: $22,032
Option B: ACA Marketplace
- Household income: $50,000 (204% FPL â eligible for subsidies)
- Benchmark silver plan: $1,000/month
- Premium tax credit: -$600/month
- Your cost: $400/month ($4,800/year)
â Winner: ACA Marketplace saves this couple $17,232 over 18 months!
When to Choose COBRA
- You're within 18 months of Medicare (age 63.5+) â COBRA bridges the gap
- You have expensive ongoing treatment (surgery, cancer) and need to keep your current doctors/networks
- Your employer plan is very generous (low premium, great coverage) and you can afford COBRA
- You're eligible for retirement HRA (Health Reimbursement Arrangement) that reimburses COBRA premiums
When to Choose ACA Marketplace
- You retire before 63.5 (need coverage for 2+ years before Medicare)
- Your household income is below 400% FPL ($62,600 for singles in 2026) â you qualify for subsidies
- You want lower premiums (even without subsidies, ACA bronze plans are cheap)
- You want to move states (COBRA only works in your employer's network area)
Frequently Asked Questions
Q: Can I switch from COBRA to ACA mid-year?
A: Yes, but only if you have a Qualifying Life Event (QLE) like COBRA running out, getting married, or moving. You can't switch just because you found a cheaper ACA plan.
Q: Is COBRA or ACA better for HSA eligibility?
A: ACA HDHP (High Deductible Health Plan) allows HSA contributions. COBRA from a non-HDHP doesn't. If you want to keep contributing to HSA, choose an ACA HDHP.
Q: What if I have retiree health benefits from my employer?
A: Some employers (especially government/union) offer retiree health coverage. This is usually better than both COBRA and ACA. Check your retirement benefits package.
Calculate Your Early Retirement Health Insurance Costs
Use our Nest Egg Planner to factor health insurance costs into your retirement savings goal.
Go to Nest Egg Planner â