COBRA vs. Short-Term Health Plans: Which Is Right for You?

Losing job-based health insurance—or retiring before Medicare kicks in—can be stressful. Suddenly, you’re faced with big questions: How will I cover medical costs? What are my options until I find a new plan? Two of the most common choices are COBRA continuation coverage and short-term health insurance plans. Each comes with unique pros, cons, and costs that can make the decision overwhelming.

This guide will break down COBRA vs short-term health insurance in clear terms, helping you understand the differences, weigh COBRA alternatives, and choose what best fits your health and financial situation.

What Is COBRA?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that lets you keep your employer-sponsored health plan for a limited time after losing coverage due to job loss, reduced hours, or retirement (if your employer has 20+ employees).

• Duration: Typically 18 months, sometimes up to 36 months in certain circumstances.

• Coverage: Identical to the health insurance you had while employed.

• Cost: You pay the full premium (your share + your employer’s share) plus a 2% administrative fee.

💡 Example: If your employer previously paid 70% of your $600 monthly premium, you may suddenly be responsible for the entire $600 plus the 2% fee—over $600 out-of-pocket each month.

What Are Short-Term Health Plans?

Short-term health insurance is a private coverage option designed to provide temporary protection during gaps in coverage.

• Duration: Typically 30 days to 12 months, with some plans renewable for up to 36 months (state laws vary).

• Coverage: Emergency care, hospital stays, some doctor visits—but usually excludes pre-existing conditions, maternity, mental health, and preventive care.

• Cost: Generally cheaper than COBRA, but with higher deductibles and more limited benefits.

Learn about situations when you should buy Short-term health plans.

💡 Example: A healthy 40-year-old might find a short-term plan for $150–$250/month compared to $600+ under COBRA.

COBRA vs. Short-Term Health Plans: Key Comparisons

Pros and Cons

COBRA Advantages

• Comprehensive coverage identical to what you had at work

• Continuity of care (keep your doctors, prescriptions, and networks)

• Good option if you’re in active treatment or have pre-existing conditions

COBRA Drawbacks

• Expensive (often 2–3x more than what you paid before job loss)

• Limited timeframe—coverage eventually ends

• Only available through eligible employers

Short-Term Health Plan Advantages

• Much lower monthly cost

• Flexible enrollment—apply anytime

• Good safety net if you’re between jobs or waiting for Medicare/ACA open enrollment

Short-Term Health Plan Drawbacks

• Doesn’t cover pre-existing conditions

• Limited benefits (no guaranteed maternity, mental health, or preventive care)

• High deductibles and out-of-pocket costs

Common Questions About COBRA Alternatives

Q: Can I switch from COBRA to a marketplace (ACA) plan later?
Yes, but only during open enrollment or if you qualify for a special enrollment period.

Q: What if I retire early but don’t yet qualify for Medicare?
COBRA can cover you for up to 18 months, but you may want to explore ACA marketplace plans for longer-term needs.

Q: Is short-term insurance ACA-compliant?
No. Short-term health plans are not required to follow Affordable Care Act (ACA) rules, which means fewer benefits and protections.

Tips for Choosing Between COBRA and Short-Term Health Plans

When deciding, consider:

• Health needs: Do you need ongoing care, prescriptions, or specialist access? COBRA may be better.

• Budget: If monthly premiums are unaffordable, short-term plans provide a cheaper, though riskier, alternative.

• Timing: If open enrollment for ACA plans is coming soon, a short-term plan could bridge the gap.

• Future plans: Retirees may lean on COBRA until Medicare, while job seekers might prefer a lower-cost short-term plan.

Checklist:

• Compare monthly premiums and deductibles

• Review what’s covered (and what’s excluded)

• Check if your current doctors are included

• Factor in how long you need coverage

Bottom Line

When comparing COBRA vs short-term health insurance, the right choice depends on your health, finances, and how long you need coverage.

• COBRA is best if you want comprehensive coverage and are willing to pay higher premiums, especially if you have ongoing health needs.

• Short-term health plans are affordable COBRA alternatives for healthier individuals who just need temporary protection.

No matter which path you choose, don’t go uninsured—medical costs can add up quickly. Explore your COBRA alternatives, compare short-term plans, and review ACA marketplace options to find the best fit for your situation.