COBRA vs Covered California: Helping Employees Make the Right Choice
When employees leave your company, they face an important decision: continue their employer coverage through COBRA, or transition to individual coverage through Covered California. Employers should help departing employees understand their options — both out of genuine care for employees and to minimize confusion that leads to gaps in coverage.
COBRA Basics
COBRA (Consolidated Omnibus Budget Reconciliation Act) allows employees who lose employer-sponsored coverage to continue that same coverage for up to 18 months (36 months in some cases). The employee pays the full premium — both the employer and employee portions — plus a 2% administrative fee. If an employer was paying $700/month and the employee was contributing $200/month, COBRA costs the departing employee $916/month ($900 full premium + 2% admin). COBRA coverage is identical to the prior employer plan — same network, same deductible, same provider relationships.
Covered California Alternative
Covered California plans may be cheaper than COBRA, especially for employees eligible for premium tax credits. In 2026, an individual earning under 400% of the federal poverty level (~$60,240/single person) may qualify for premium subsidies. A subsidized Covered California silver plan might cost $150–$350/month vs $600–$900 for COBRA. The trade-off: Covered California plans have different networks, potentially different deductibles and cost-sharing, and the employee may need to change providers.
Qualifying Event and Timing
Job loss is a qualifying life event that opens a 60-day special enrollment window on Covered California. COBRA election has a 60-day window as well. Employees can elect COBRA and then switch to Covered California (the COBRA election doesn't prevent switching), but they cannot retroactively switch — they must make decisions before coverage lapses. Inform departing employees of both options in the COBRA notice required under federal law.