Then the letter arrives with the actual price of keeping your health insurance, and the number can feel like a second layoff.
Cobra, the federal law that lets you stay on your former employer's plan for up to 18 months, sounds like a safety net — until you see who's actually holding the bill.
Here's the catch most people discover too late: your employer was likely paying the majority of your premium all along.
Once you're on Cobra, that subsidy vanishes.
You pay the full freight, plus a 2% administrative fee that employers are allowed to tack on.
So a plan that cost you $150 a month from payroll can balloon past $700 — and for family coverage, it's often north of $2,000 a month.
The Kaiser Family Foundation's annual survey puts average annual premiums for employer-sponsored family coverage well over $23,000, with employers covering roughly three-quarters of that.
Flip the math and you see the trap: the worker's share was the tip of the iceberg.
The employer keeps its group rate stable.
And the 2% fee quietly pads the administrative middleman.
Meanwhile, roughly 7 million Americans are eligible for Cobra in any given year, and a large share never enroll because of the sticker price, according to research from the Employee Benefit Research Institute.
There are escape hatches, but they require acting fast.
If you lose coverage, you typically have 60 days to enroll in Cobra, and a separate special enrollment window on the Affordable Care Act marketplace, which is also 60 days.
Marketplace plans often come cheaper because they're subsidized based on income — subsidies that don't apply to Cobra.
For a 40-year-old earning $50,000, a silver marketplace plan after tax credits can run hundreds less per month than the Cobra equivalent.
Miss the marketplace window because you were busy agonizing over Cobra, and you may be locked out until the next open enrollment.
Some people enroll in Cobra first as a stopgap, then switch to a marketplace plan during open enrollment — legal, but you're paying full price in the meantime.
If your former employer goes bankrupt or drops the group plan entirely, Cobra coverage can evaporate mid-stream.
If you move or your provider network changes, that pricey plan may not cover your doctors anyway.
And dental and vision are usually separate add-ons with their own eye-watering rates.
Then there's the quiet alternative: short-term health plans, which are cheaper but can exclude pre-existing conditions and cap benefits.
They're a gamble, not a solution, and several states have restricted them.
The practical takeaway: the moment you lose coverage, price three things in parallel — Cobra, a marketplace plan with subsidies, and, if you're married, your spouse's plan.
Compare total monthly cost, deductibles and whether your doctors are in-network.
Don't default to the letter your former HR department mailed you.
Our take: Cobra is less a benefit than a billing mechanism, and the 2% fee on top of an already unsubsidized premium is salt in the wound.
Treat that enrollment letter as a deadline to shop, not a decision to sign.
Final Thoughts
The system is designed for inertia — your job is to interrupt it.