When to Leave COBRA and Switch to a Self-Employed Health Plan

COBRA is one of the most expensive ways to keep health insurance, but it has a specific purpose: letting you keep the exact plan from your old job so you don't disrupt ongoing treatment or miss a procedure that's already scheduled. Once that purpose is served, it's usually time to switch.

The cost of staying on COBRA

The average COBRA premium is 1.8x to 2x what the ACA marketplace charges for a comparable plan, because you're paying what your employer used to subsidize plus a 2% admin fee. A family plan that cost you $400 a month as an employee might cost $1,600 a month on COBRA.

For a 40-year-old family of four, that's often the single biggest unexpected expense of going self-employed.

Signs it's time to switch

You've confirmed your doctors are in-network on a cheaper plan. You're past any scheduled procedures or mid-treatment care that would be disrupted by a carrier change. It's the 20th of the month (enrollment cutoffs for most Working Owner plans are the 23rd, so you have a window).

Timing the switch

Your new plan's coverage is effective the 1st of the following month. Don't cancel COBRA until the 1st of that month or you'll create a gap. Most people pay COBRA through the last day of the month, then the new plan takes over seamlessly on the 1st.

The math on a typical switch

COBRA family plan: $1,600 a month. Working Owner group family plan: $900 a month. You save $700 a month, or $8,400 a year. Over the 18 months you could have stayed on COBRA, that's $12,600 back in the business.