Why Is COBRA So Expensive? Because You Were Only Ever Seeing Half the Bill

Nothing has been marked up and you are not being penalised. Your employer was paying most of the premium, and COBRA simply moves the whole bill to you. Here is the arithmetic, and what to do about it.

Your payroll deduction was never the price

Almost everyone opens a COBRA election notice and assumes there has been a mistake, or that they are being punished for leaving. Neither is true, and the real explanation is more annoying than either.

Employer health insurance is a split bill. Your employer paid most of it, you paid the rest through payroll, and the only number you ever saw was your part. COBRA does not raise the price of your coverage. It moves the whole bill to you.

What that works out to

The KFF Employer Health Benefits Survey is the standard benchmark for what employer coverage costs. Its 2025 figures, and what 102 percent of them looks like:

Premium and worker-contribution figures: KFF 2025 Employer Health Benefits Survey. The COBRA column is 102% of the total, computed here for illustration — it is not a KFF figure, and your own plan will differ.

So the single person goes from about $120 to about $793, and the family from about $571 to about $2,294. Roughly six times and four times. Those multiples are why COBRA feels punitive when it is really just arithmetic.

Your own number is on the notice, and unlike almost every other health insurance figure you will be quoted, it is exact. It is what your specific plan costs.

What the 2 percent is for

Administration — billing you, tracking your eligibility, sending notices, remitting to the carrier. Plans are not obliged to charge it, but nearly all do, and on a family premium it is roughly $45 a month.

It is worth knowing about mainly because it explains the odd number. People see "102 percent" and assume it is a typo for 100, or suspect a hidden fee. It is neither.

Three situations where it is higher still

• The disability extension. If the Social Security Administration determined you disabled during the first 60 days of COBRA, you can extend from 18 months to 29 — but the plan may charge up to 150 percent of the full cost for months 19 through 29. The extension is usually worth having anyway; just do not be surprised by the invoice.
• Your employer was subsidising more than you realised. Generous employers pay 85 or 90 percent of family premiums rather than the 74 percent average. The more generous the benefit was, the harder COBRA lands.
• A mid-year rate increase. COBRA premiums track the plan's actual cost, so when the group renews at a higher rate, yours goes up with it.

One thing that will not raise it: your health. COBRA is a continuation of the same group coverage at the group's cost. Nobody is rating you individually.

And a limit worth knowing — federal COBRA only applies to employers with 20 or more employees. If your employer was smaller, what you have been offered is state continuation coverage, which most states require and which runs on different rules. Kentucky, for instance, gives 18 months to employees of employers under 20. More on that here →

What costs less

The short version, in the order worth checking:

1. A spouse's or partner's employer plan. Your loss of coverage opens a special enrollment period on their plan, and their employer is subsidising it. Frequently the cheapest thing available and frequently forgotten.
2. A marketplace plan with a premium tax credit. Subsidies key off your projected income for the year, not last year's W-2, so a mid-year layoff often qualifies you for far more than your old salary suggests.
3. Medicaid, if your income has dropped far enough. No enrollment window — you can apply any day.
4. A parent's plan, if you are under 26.

The one caveat on the marketplace route, and it is new: the enhanced premium tax credits expired at the end of 2025, so credits now phase out entirely above 400 percent of the federal poverty level. Above that line you pay full price on the marketplace too, and the comparison gets much closer — particularly if you have already met your deductible this year. Below it, a subsidised plan usually wins by a lot.

Full comparison of the options: COBRA alternatives →

One thing nobody tells you: your HSA can pay for it

Health insurance premiums are normally not a qualified HSA expense. Continuation coverage is one of a very short list of exceptions written into the tax code, alongside long-term care insurance and coverage while you are receiving unemployment compensation.

So if you have a funded HSA sitting from your old high-deductible plan, that balance can go against your COBRA premiums tax-free. For a lot of recently laid-off people that is several months of coverage they did not know they had already paid for. It applies to premiums while you are collecting unemployment too, which covers most of the same people twice over.

Frequently asked

Can I negotiate my COBRA premium?

No. It is set by the plan's actual cost and capped by statute. There is no discretion at the administrator's end, so there is nobody to ask.

Does COBRA get cheaper over time?

No — it tracks the group's premium, so if anything it rises at the group's renewal. The one exception runs the other way: the disability extension makes months 19 to 29 more expensive, not less.

Is COBRA tax deductible?

Premiums may count toward the medical expense itemised deduction, which only helps above a threshold of adjusted gross income and only if you itemise. If you are self-employed, the self-employed health insurance deduction is usually the better route. Worth a conversation with your accountant rather than an assumption.

Sources: DOL, An Employee’s Guide to Health Benefits Under COBRA · 29 U.S.C. 1162 · KFF 2025 Employer Health Benefits Survey · IRS Publication 969