COBRA feels so expensive because you suddenly pay the entire group health insurance premium your employer used to split with you, plus a 2% administrative fee on top. While you were employed, your paycheck deduction represented only a small slice of what the plan actually cost. Once you move to COBRA, the full price lands on your personal budget with no employer subsidy behind it. For a family plan, that can mean more than $2,200 a month.
Your Employer Was Paying Most of the Premium
The biggest reason for the sticker shock is that your employer was quietly covering the majority of the bill. On average, employers pay about 84% of the premium for individual coverage and about 74% for family plans.1KFF. 2025 Employer Health Benefits Survey – Summary of Findings The deduction you saw on each paycheck was your share of a much larger monthly cost, and most workers never had reason to look at the total.
When you leave the job or lose enough hours to lose benefits, that employer contribution disappears. COBRA preserves your right to stay on the same group plan, but you take over the full premium: your old share plus everything the employer had been paying.2Centers for Medicare & Medicaid Services. COBRA Continuation Coverage The subsidy was tied to your employment, so it ends with the job even though your coverage can continue.
What the Jump Looks Like in Dollars
In 2025, the average annual premium for employer-sponsored health insurance was $9,325 for individual coverage and $26,993 for family coverage.3KFF. 2025 Employer Health Benefits Survey Monthly, that is roughly $777 for an individual plan and about $2,249 for a family plan before the administrative surcharge.
Add the 2% surcharge and a COBRA participant pays roughly $792 a month for individual coverage or $2,294 for a family plan. Workers at the same jobs contribute an average of 16% of the premium for individual coverage, about $124 a month, and 26% for family coverage, about $585 a month.1KFF. 2025 Employer Health Benefits Survey – Summary of Findings Going from $124 to $792 is more than a sixfold increase for an individual. For a family, $585 jumps to $2,294, close to a fourfold increase. Nothing about the coverage changed. Only who pays for it did.
The 2% Administrative Surcharge
Federal law lets plan sponsors add up to 2% as an administrative fee on top of the full premium. Under 29 U.S.C. ยง 1162, the total charge for COBRA coverage cannot exceed 102% of what the plan costs for a similarly situated active employee.4Office of the Law Revision Counsel. 29 USC 1162 – Continuation Coverage The extra 2% is meant to offset the cost of processing payments, mailing notices, and tracking eligibility for former employees. On a $2,249 family premium, that adds about $45 a month.
The 2% is a ceiling, not a requirement, but most employers charge the full amount.
The 150% Surcharge During a Disability Extension
If you qualify for the 11-month disability extension of COBRA, the surcharge changes dramatically. For those additional months, the plan can charge up to 150% of the applicable premium instead of 102%.5eCFR. 26 CFR 54.4980B-8 – Paying for COBRA Continuation Coverage On the same family plan, that pushes the monthly cost to roughly $3,374. The standard 102% rate still applies to the initial 18-month period; the 150% rate only kicks in for the extension months.
Why You Cannot Switch to a Cheaper Plan
COBRA locks you into whatever plan your employer negotiated with the insurance carrier. Group plans often include broad provider networks and lower deductibles, both of which push the premium up. You cannot swap down to a stripped-down, lower-cost option the way you could shopping on the individual market.
The premium is also based on the health profile of the entire employee group, not your personal health. Carriers set the rate by looking at claims history and demographics across the whole workforce, so if the group skews older or higher-cost, everyone’s rate reflects that, including yours on COBRA. Those rates are typically fixed for a 12-month cycle during the employer’s annual renewal with the insurer.6U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Workers If a rate increase falls within your COBRA period, your premium goes up with it.
Ways to Soften the Cost
If you have a Health Savings Account, you can use those funds to pay COBRA premiums tax-free. HSA money generally cannot be spent on insurance premiums, but federal law carves out an exception for continuation coverage required under federal law, which includes COBRA.7Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts An HSA balance built up while you were employed can directly offset months of COBRA payments without taxes or penalties.
COBRA premiums also count as a medical expense for tax purposes. If you itemize and your total medical expenses for the year exceed 7.5% of your adjusted gross income, the premiums are deductible.8Internal Revenue Service. Publication 502 (2025) – Medical and Dental Expenses Given how high COBRA premiums are, clearing that threshold is more realistic than in a typical year, especially if you had other medical costs during the same stretch.
Cheaper Alternatives Worth Comparing
Before committing to COBRA, run the numbers against your other options. Many people assume COBRA is the only route, and it rarely is.
ACA Marketplace Plans
Losing job-based coverage triggers a 60-day special enrollment period on the Health Insurance Marketplace, which opens access to plans outside your old employer’s group.9HealthCare.gov. See Your Options If You Lose Job-Based Health Insurance Marketplace plans often cost less than COBRA because you may qualify for premium tax credits tied to your household income, and being eligible for COBRA does not disqualify you from those subsidies.6U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Workers If your income has dropped because of the job loss, the subsidies can be substantial. The 60-day window runs from the date you lose employer coverage, so move quickly.
Other Routes
- A spouse’s employer plan. Your loss of coverage typically qualifies as a special enrollment event on their plan. If you are under 26, a parent’s plan may also be an option.
- Medicaid. If your income drops below your state’s threshold after the job loss, Medicaid has no monthly premium in most states.
- Short-term health insurance. Cheaper than COBRA, but these plans typically do not cover pre-existing conditions and are not required to include the same essential health benefits as ACA-compliant plans. They can bridge a gap, but they leave real gaps too.
COBRA does have one real advantage. It keeps you on the exact same plan with the same doctors, networks, and benefits you had while employed. If you are mid-treatment or well into your annual deductible, switching plans could mean starting over. Paying the higher COBRA premium for a few months while you transition can make sense in that situation, particularly because COBRA coverage is retroactive to your qualifying event once you elect and pay.10Centers for Medicare & Medicaid Services. COBRA Continuation Coverage Questions and Answers That retroactivity lets some people wait and see whether they actually need the coverage before committing to the bill.
One boundary worth knowing: federal COBRA only applies to employers with 20 or more employees.2Centers for Medicare & Medicaid Services. COBRA Continuation Coverage If your employer is smaller, the costs described here may not apply to you, but a state continuation law (“mini-COBRA”) might, with its own pricing rules. Check with your state insurance department.