COBRA Insurance Cost: What the Self-Employed Actually Pay

If you just left a job to work for yourself, the COBRA election notice sitting in your inbox probably contained a number that made you stop reading. The COBRA insurance cost you are quoted is usually three to five times what came out of your paycheck as an employee, and it is not a typo. COBRA keeps you on your former employer’s exact plan but removes the employer’s contribution, so you inherit the entire premium plus an administrative fee.

I have walked through this decision with dozens of newly self-employed people over the last several years, from designers leaving agency jobs to engineers going independent. The pattern is almost always identical. They see the number, panic, and then either enroll out of fear or skip coverage entirely, and both reactions tend to cost them money.

This guide breaks down how the COBRA insurance cost is calculated, what real premiums look like now, how COBRA compares to marketplace coverage after the subsidy rules changed, and the narrow situations where paying the higher price is the right call.

What COBRA is and who qualifies

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, a federal law that lets you keep employer-sponsored health coverage for a limited time after a qualifying event. Leaving a job, having your hours cut, divorce, and aging off a parent’s plan all count. The law applies to private employers with 20 or more employees, plus state and local governments.

Coverage typically runs up to 18 months for the former employee, and up to 36 months for spouses and dependents after certain events. The Department of Labor’s COBRA guidance lays out the full eligibility rules and the notice requirements your former employer has to follow.

For someone moving from a salaried job into self-employment, COBRA is usually the first option on the table. There is no new application, no health underwriting, and no gap in coverage. Your doctors, your deductible progress, and your prescription formulary all stay exactly where they were.

How your COBRA insurance cost is calculated

Here is the part that surprises almost everyone. Your COBRA insurance cost is not set by the insurance company or negotiated by you. It is the full group premium for your former employer’s plan, meaning your old payroll deduction plus whatever your employer was quietly paying on your behalf, plus an administrative fee of up to 2 percent.

That employer contribution is the whole story. Most employers cover somewhere between 60 and 85 percent of the premium for single coverage, and a smaller but still substantial share for family coverage. When you leave, that subsidy vanishes and the sticker price lands on you in full.

There is one exception worth knowing. If you qualify for the 11-month disability extension beyond the standard 18 months, the plan may charge up to 150 percent of the premium during those extra months rather than 102 percent.

What the numbers look like in practice

The most recent KFF Employer Health Benefits Survey put the 2025 average annual premium for employer-sponsored coverage at $9,325 for single coverage and $26,993 for family coverage. Those are total premiums, employer share included, which is exactly what COBRA charges you.

Translated into a monthly COBRA insurance cost with the 2 percent fee added, the averages look like this.

Those are national averages. Plans in high-cost metro areas, plans with rich benefits, and plans covering older workforces run meaningfully higher. Source: KFF 2025 Employer Health Benefits Survey.

Real COBRA insurance cost examples from freelancers I have advised

Averages are useful for planning, but the shock is easier to understand with specifics. In my experience the gap between what someone paid as an employee and what COBRA charges is where the emotional reaction comes from, not the absolute number.

A marketing manager in her mid-thirties who went independent last year had been paying about $95 a month for single coverage through payroll. Her COBRA quote was $684 a month for the identical plan. Nothing about her benefits changed. Only the contribution structure did.

A married developer with two kids saw a different version of the same math. His family coverage cost $420 a month as an employee. Under COBRA it was $2,180 a month, which is more than his mortgage payment and a number no new consulting practice absorbs comfortably in month one.

The lesson I repeat every time is this. Your old payroll deduction tells you nothing useful about your COBRA insurance cost, so never budget for self-employment using that figure.

How the COBRA insurance cost compares to marketplace plans now

For years the standard advice was simple. Skip COBRA, buy a subsidized silver plan on the marketplace, and pocket the difference. That advice needs an update, because the enhanced premium tax credits created in 2021 expired at the end of 2025.

The practical consequences are real. KFF analysis found that average out-of-pocket marketplace premium payments rose sharply for 2026, and enrollees with income above 400 percent of the federal poverty level, roughly $63,000 for an individual, no longer receive any premium tax credit at all. That cliff is back.

Below that income line, subsidies still exist and still make marketplace coverage the cheaper option for most self-employed people. Above it, the comparison is now much closer, and in some markets a bronze or silver plan can cost within a few hundred dollars a month of COBRA for a narrower network.

How to run the comparison properly

Do not compare premiums alone. Pull your COBRA election notice and write down the monthly premium, deductible, out-of-pocket maximum, and how much of your deductible you have already met this year. Then price equivalent plans at HealthCare.gov or your state exchange.

Add the remaining deductible to the annual premium for each option. A marketplace plan that saves you $250 a month but restarts a $6,000 deductible in September is not a saving, it is a deferred bill.

Then check networks. Search each candidate plan for your primary care doctor, any specialist you see regularly, and your pharmacy before you make the switch.

The deadlines that quietly decide this for you

Timing is where people lose money, more often than pricing. You get 60 days from your qualifying event or the date your coverage ends, whichever is later, to elect COBRA. You then get 45 days from the election date to make your first payment.

Losing job-based coverage also opens a 60-day special enrollment period on the marketplace. That window runs on its own clock, and if you let it close you may be stuck with COBRA until the next open enrollment period.

One detail that works in your favor. COBRA is retroactive to the day your employer coverage ended, so if you have a claim during the election window you can elect COBRA after the fact and have it covered. That makes the 60 days a free option, which is why I tell people to use the full window rather than deciding in week one.

When paying the higher COBRA insurance cost is worth it

COBRA is expensive, but there are four situations where I have seen it clearly win.

• You are mid-treatment. Active cancer care, a scheduled surgery, fertility treatment, or a specialist relationship you cannot replace makes network continuity worth real money.
• You have already met most of your deductible. If you are $5,000 into a $6,000 deductible in August, restarting at zero on a new plan usually costs more than four months of COBRA.
• You expect coverage soon. A spouse’s open enrollment three months out, or a contract-to-hire role with benefits, turns COBRA into a short bridge rather than an 18-month commitment.
• Your income puts you over the subsidy cliff. Above roughly $63,000 for an individual there is no premium tax credit, which narrows the gap considerably.

Outside those cases, COBRA is an expensive default. It is familiar, which is exactly why so many people choose it without running the numbers.

Five ways to lower what you pay

You cannot negotiate the COBRA insurance cost itself, but you can change the shape of the decision.

1. Elect a cheaper tier at open enrollment. If your former employer’s open enrollment falls during your COBRA period, you can usually switch to a lower-cost plan option offered to active employees.
2. Drop dependents from COBRA. Covering yourself on COBRA while your spouse and children take a subsidized marketplace plan is often cheaper than family COBRA.
3. Use the 60-day window as leverage. Do not pay a premium you may not need. Wait, shop, and elect retroactively only if a claim occurs.
4. Ask about severance-paid COBRA. Many severance packages cover two to six months of premiums, and it is frequently negotiable if you ask before you sign.
5. Pair a high-deductible plan with an HSA. If you go the marketplace route, an HSA-eligible plan gives you a triple-tax-advantaged account that doubles as a medical emergency fund.

Can you deduct COBRA premiums as a self-employed person?

This is where I see the most confident wrong answers online, so be careful. The self-employed health insurance deduction lets qualifying business owners deduct 100 percent of medical, dental, and qualified long-term care premiums against income, above the line, without itemizing.

COBRA is more complicated, because the deduction requires the plan to be established under your business and disqualifies you for any month you are eligible for a subsidized employer plan. Tax professionals disagree about whether COBRA from a former employer meets the “established under the business” test, and the IRS has not resolved it cleanly. The IRS instructions for Form 7206 are the right starting point, and this is a question worth twenty minutes with your accountant rather than a guess.

If the above-the-line deduction is off the table, COBRA premiums can still count as itemized medical expenses, subject to the threshold on Schedule A. Either way, the deduction changes the effective cost of every option you are weighing, so factor it in before you choose. For the broader picture of what independent workers can write off, our guide to self-employed tax deductions and write-offs covers the categories most freelancers miss.

Your premium decision also feeds directly into your estimated payments, since a large deduction lowers what you owe each quarter. If you are new to that rhythm, start with our walkthrough of how quarterly taxes work for the self-employed and adjust your first payment once your coverage is locked in.

Do this week

• Request the full COBRA election notice from your former employer and write down the exact monthly premium.
• Note both 60-day deadlines on your calendar, the COBRA election window and the marketplace special enrollment window.
• Price equivalent plans at HealthCare.gov or your state exchange, including a subsidy estimate at your projected self-employed income.
• Check how much of your current deductible you have already met this year.
• Search each candidate plan for your doctors, specialists, and prescriptions by name.
• Price splitting coverage, with you on COBRA and dependents on a marketplace plan.
• Ask your accountant whether your COBRA premiums qualify for the self-employed health insurance deduction.
• Set a reminder to reassess in six months, or sooner if your income changes materially.

Final thoughts

COBRA is a safety net, not a plan. The 18-month clock means the decision gets made eventually, so the only real question is whether you make it deliberately now or by default later.

The self-employed people I have seen handle this well are not the ones who found a magic cheap plan. They are the ones who spent three focused hours during the 60-day window comparing total annual cost rather than monthly premiums, and who picked coverage they could sustain through a slow quarter. For a wider look at every option available to independent workers, our complete guide to self-employed health insurance covers marketplace plans, health sharing ministries, spousal coverage, and short-term policies in detail.

How much does COBRA insurance cost per month on average?

Based on the KFF 2025 Employer Health Benefits Survey, the average COBRA insurance cost works out to roughly $793 a month for single coverage and $2,294 a month for family coverage once the 2 percent administrative fee is added. Your actual quote depends entirely on your former employer’s plan.

Why is COBRA so much more expensive than my old payroll deduction?

Because your employer was paying most of the premium. Under COBRA you pay the full group rate plus up to 2 percent in administrative fees, so the plan did not get more expensive, the subsidy simply disappeared.

Is COBRA or a marketplace plan cheaper for freelancers?

For most self-employed people earning under 400 percent of the federal poverty level, a subsidized marketplace plan is still cheaper. Above that income there is no premium tax credit now that the enhanced subsidies have expired, which makes the comparison much closer.

How long do I have to decide on COBRA?

You have 60 days from your qualifying event or your coverage end date, whichever is later, to elect COBRA, and another 45 days to make the first payment. Coverage is retroactive to the day your employer plan ended, so you can wait and shop.

Can I put only myself on COBRA and my family on a marketplace plan?

Yes. Splitting coverage this way is often the cheapest route when one family member needs continuity of care and the others do not, and it is one of the most reliable ways to lower your total COBRA insurance cost.

Are COBRA premiums tax deductible if I am self-employed?

Possibly, but it is not automatic. The self-employed health insurance deduction requires the plan to be established under your business, and tax professionals disagree about whether COBRA from a former employer qualifies. Ask your accountant before you assume the deduction.

What happens when my 18 months of COBRA run out?

Losing COBRA at the end of its maximum period is a qualifying event that opens a special enrollment period on the marketplace. Start shopping about 60 days before your end date so there is no gap in coverage.