COBRA vs ACA After a Layoff: The 2026 Math Just Changed

For three years, the standard advice after a layoff was almost automatic: skip COBRA, take the marketplace plan, collect the subsidy. That advice broke on January 1, 2026, when the enhanced premium tax credits expired. If your layoff happened this year, or your employer-paid COBRA subsidy is about to run out, the decision now turns on a number most comparison articles never mention: how much severance you were paid, and in which calendar year.

This is a hard week to be doing insurance math. But this one decision can swing $5,000 or more over the next twelve months, so it’s worth an hour of your attention before your 60-day windows close.

What changed on January 1, 2026?

Two things, both of which matter to you specifically as a laid-off worker.

First, the enhanced premium tax credits expired. From 2021 through 2025, marketplace subsidies were larger at every income level and, critically, available above the old income ceiling. KFF estimated that expiration would push average marketplace premium payments up roughly 114%, about $1,016 a year, and the early data agrees: 2026 open-enrollment sign-ups fell by more than a million people, the sharpest drop since the marketplaces opened. The Congressional Research Service’s R48290 briefing is the neutral reference if you want the legislative mechanics; check it (or healthcare.gov) before finalizing anything, since Congress could still act mid-year.

Second, the 400%-of-poverty subsidy cliff is back. From 2021–2025, no household paid more than 8.5% of income for a benchmark plan, no matter how much they earned. In 2026, a household above 400% of the federal poverty level gets no premium tax credit at all. For a single filer, that line sits at roughly $62,600 of 2026 income; for a family of four, about $128,600 (based on the 2025 HHS poverty guidelines that govern 2026 coverage). One dollar over the line doesn’t trim the subsidy; it erases it.

Why does severance change which option wins?

Because the marketplace subsidy is calculated on your modified adjusted gross income for the whole calendar year, and severance is taxable wages. Your final paychecks, your PTO payout, your bonus, your unemployment benefits, and your entire severance package all stack into the same 2026 number.

Consider a hypothetical: a single worker laid off in June from a $140,000 role with a 20-week severance package. Half a year of salary (~$70,000) plus ~$54,000 of severance puts 2026 MAGI around $124,000, roughly double the $62,600 cliff. On the marketplace, that worker pays full sticker price: no subsidy, against 2026 premiums that insurers raised by a median of ~18%. Suddenly COBRA’s “expensive” reputation deserves a second look.

Now run the same worker in 2027: no salary, maybe some unemployment and freelance income, say $30,000. At that income the marketplace subsidy returns in force, and COBRA almost certainly loses. Same person, opposite answer, twelve months apart. That’s the 2026 rule of thumb: COBRA tends to win the high-income severance year; the marketplace tends to win the lean year that follows.

What does COBRA actually cost?

COBRA isn’t a product: it’s the right to keep your exact employer plan by paying up to 102% of its full cost (both shares, plus a 2% admin fee; the Department of Labor’s COBRA guide covers the statutory mechanics). Against KFF’s 2025 Employer Health Benefits Survey, the full premium runs about $9,325 a year for single coverage and $26,993 for family coverage. At 102%, that’s roughly:

Coverage	Typical paycheck deduction (employed)	COBRA monthly cost	Multiple
Single	~$124/mo (16% worker share)	~$793/mo	~6.4×
Family	~$585/mo (26% worker share)	~$2,294/mo	~3.9×

The sticker shock is real, but remember what you’re buying: the same network, the same deductible you’ve already been paying down all year, and zero disruption to in-progress care. If anyone in the household is mid-treatment, pregnant, or deep into a deductible, that continuity has hard dollar value the monthly premium doesn’t show.

One employer-specific note: some packages include a subsidized COBRA window. At the generous end of tech, Google’s standard package includes six months of subsidized COBRA, and several peers run 3–6 month versions. A subsidy changes the sequencing, not the logic: the decision point simply moves to the month the subsidy ends.

How do the deadlines actually work?

Three clocks run at once, and they don’t start on the same day:

1. COBRA election: 60 days from the later of your election notice or your coverage end date. Election is retroactive to the loss date; there is no gap.
2. First COBRA payment: 45 days after you elect, covering all retroactive months. After that, monthly payments get a 30-day grace period.
3. Marketplace special enrollment: 60 days from losing job-based coverage (you can also enroll up to 60 days before a known loss date).

The retroactivity of COBRA creates a legitimate bridge strategy many benefits administrators will quietly confirm: during your 60-day election window you are effectively covered if you need to be: break a leg on day 40, elect COBRA, pay retroactively, and the claim is covered. Use that window to do this math properly; just diary the deadline, because day 61 is unforgiving. The mechanics are covered step-by-step in the COBRA election deadline guide.

When does the marketplace still win in 2026?

Plenty of situations. The expiration didn’t make the marketplace bad, it made it income-sensitive:

• Low severance or an early-year layoff with little income: if 2026 MAGI lands under the cliff (and especially under ~250% of poverty, where cost-sharing reductions also apply), subsidies still do real work.
• The year after the layoff: almost always. Pick a plan at November open enrollment.
• Monthly income now near zero: in expansion states, Medicaid assesses current monthly income, not annual: a high earner whose income stopped can qualify mid-year even with a big W-2 already banked. It’s free or near-free; check your state agency before paying anyone a premium.
• Your employer plan was thin anyway: COBRA continuity is worth little if the plan itself was a high-deductible plan you never used.

What’s not a good reason: guessing. Run your projected 2026 MAGI (final pay + severance + unemployment + everything else) against the cliff numbers before you choose. The 90-day money plan walks the same decision in sequence with the rest of your first-quarter triage.

How do you actually run your own numbers?

Forty-five minutes, four steps, all free:

1. Project your 2026 MAGI. Add up: salary already paid this year, severance (gross, the number in the agreement, not the smaller check after the 22% withholding), PTO payout, any bonus, projected unemployment benefits, and expected freelance income. This single number against the cliff thresholds does most of the deciding.
2. Get your real COBRA price. It’s printed on your election notice, or one call to the plan administrator gets it. Don’t estimate from averages when the actual number exists: plans vary enormously around that $793 mean.
3. Price the marketplace at your projected income. Healthcare.gov’s plan preview shows real 2026 premiums for your county with your subsidy (or lack of one) applied, and KFF’s enhanced-credit calculator shows exactly how the expiration changed your bracket. Compare net premiums plus deductible exposure, not stickers.
4. Check the Medicaid door before paying anyone. If household monthly income has dropped near zero, your state’s eligibility rules may cover you free while the search runs, and you can hold COBRA’s election window open in parallel while you confirm.

If the numbers land close, weigh the soft factors (network continuity, the deductible you’ve already paid down, prescription formularies) and consider a session with a fee-only CFP or a free marketplace navigator before committing; mid-year Medicaid transitions and HSA interactions are exactly the edge cases where an hour of professional time pays for itself.

The decision in one table

Your situation	Likely 2026 winner	Why
Large severance this calendar year (over the 400% FPL cliff)	COBRA	No subsidy survives the cliff; COBRA price ≈ unsubsidized marketplace, with continuity
Subsidized COBRA window in your package	COBRA now, re-decide when subsidy ends	Free/cheap months are free; the real decision comes later
Mid-treatment, pregnant, or deductible already met	COBRA	Continuity of network, providers, and accumulated deductible
Modest severance, MAGI under the cliff	Marketplace	Subsidies still function below 400% FPL
Monthly income near zero, expansion state	Medicaid	Monthly-income test; can apply any time
The year after the severance year	Marketplace	Low MAGI restores the subsidy in full

This is educational math, not individualized advice. A one-hour session with a fee-only planner or a marketplace navigator (free, at healthcare.gov) is worth it for edge cases like HSA strategy, mid-year Medicaid transitions, or a spouse’s plan as the fourth option.