Bridge Coverage After Losing Employer Insurance: What It Really Costs in 2026

What Bridge Coverage Actually Costs in 2026

Start with the number your former employer will quote you. Under the Department of Labor’s COBRA rules, the plan may charge up to 102% of the total cost of coverage — your old payroll deduction, plus the employer’s share, plus a 2% administrative fee. Applying that multiplier to KFF’s 2025 national averages produces the baseline every other option gets measured against.

Employer premium and worker-contribution figures: KFF 2025 Employer Health Benefits Survey. COBRA multipliers: U.S. Department of Labor, A Worker’s Guide to Health Benefits Under COBRA. Marketplace net payment: KFF analysis of CMS 2026 Open Enrollment data.

The COBRA rows are modeled, not measured. KFF reports the annual premium; the monthly figure divides by twelve and applies the statutory 1.02 multiplier ($26,993 ÷ 12 × 1.02 = $2,294). Your actual quote depends on your specific plan’s cost, and plans may charge less than the ceiling. The disability-extension row uses the 150% multiplier the Department of Labor permits during the additional 11 months when the disabled beneficiary remains covered.

One structural note on the Marketplace row: $178 is the average net payment across all 2026 enrollees, including the 13% who receive no tax credit at all. It is not a quote. Anyone above the cliff pays the unsubsidized rate, which is why that row shows sticker price rather than a national average.

How the 400% Cliff Rewrote the Math This Year

Under the American Rescue Plan and the Inflation Reduction Act, no household paid more than 8.5% of income for a benchmark Silver plan, regardless of earnings. Congress let those enhancements lapse at the end of 2025. The pre-2021 structure returned: subsidies run from 100% to 400% of the federal poverty level, and above that line, they stop completely.

The threshold that governs 2026 coverage is the 2025 poverty guideline, not the 2026 one — the Marketplace always compares projected income against the prior year’s table. For 2025, that guideline was $15,650 for a single person in the 48 contiguous states, rising $5,500 per additional household member. Four hundred percent of those figures sets the cliff.

2025 HHS poverty guidelines, applied to 2026 Marketplace eligibility per standard Marketplace practice of using prior-year guidelines. U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation (verify at aspe.hhs.gov).

Enrollees noticed. KFF found that people between 400% and 500% of poverty made up 3% of 2025 sign-ups but 27% of the drop in 2026 sign-ups — a 44% collapse in that band alone. Add those above 500%, and consumers past the cliff accounted for nearly half the total enrollment decline while representing 7% of prior-year enrollment.

Severance changes this calculation in a way many people miss. A lump-sum payment counts toward your modified adjusted gross income for the year you receive it. Someone laid off in March with $40,000 in severance and $50,000 in wages already earned lands at $90,000 — well past the single-filer cliff of $62,600 — even though they have no ongoing income. The subsidy estimate you generate in April may not survive the tax return you file next spring.

COBRA vs. Marketplace: Which Is Better for a Six-Month Gap?

Consider Dana, 52, single, laid off May 31 from a firm whose family-tier plan matched the national average. Her COBRA quote is $793 per month for single coverage. She expects $34,000 in 2026 income — $28,000 already earned plus $6,000 in severance — placing her at roughly 217% of the poverty level and squarely inside subsidy territory.

Six months of COBRA costs her $4,758. She keeps her deductible progress, her existing network, and her specialist. Six months on a subsidized Silver plan with cost-sharing reductions costs her a fraction of that, and because she is under 250% of poverty, she qualifies for the reduced deductibles that make Silver plans behave like Gold ones. The difference runs to several thousand dollars across the gap.

Now change one variable. Dana’s severance is $45,000 rather than $6,000. Her projected income becomes $73,000, past the $62,600 cliff. She now owes the full unsubsidized Marketplace premium, and the comparison flips toward a much closer call — one that turns on whether her deductible is already partly satisfied and whether her providers appear in Marketplace networks.

Where Short-Term Plans Fit — and Where They Don’t

Federal rules on short-term, limited-duration insurance are unsettled. The 2024 tri-agency final rule capped initial terms at three months and total duration, including renewals, at four months. In August 2025, the Departments of Labor, Health and Human Services, and the Treasury announced they would revisit that definition and would not prioritize enforcement in the interim — leaving state law as the operative constraint in most markets. Some states are stricter than the federal rule; others are far looser.

Price is the appeal. Underwriting is the catch. These policies are excluded from the ACA’s individual-market protections, which means they can decline you for health history, exclude pre-existing conditions, cap annual benefits, and omit prescription drugs, maternity care, and mental health services entirely. They also do not count as minimum essential coverage, so ending one does not open a Marketplace special enrollment period.

The defensible use case is narrow: a healthy person with no chronic prescriptions and a confirmed start date at a new employer four to eight weeks out, who has priced COBRA and found it does not pencil. Anyone managing a chronic condition should read the coverage exclusions before the premium, and should compare how chronic condition coverage differences play out under comprehensive plans instead.

Verify your own state’s rule before you buy. Because federal enforcement is suspended, a broker quoting a twelve-month term may be operating legally in your state and illegally in your neighbor’s.

If You’re 62 or Older: The Medicare Clock Starts Without You

Age changes the entire structure of this decision, and the most expensive mistake in bridge coverage belongs almost exclusively to people over 65.

Your Medicare Part B Special Enrollment Period runs eight months from the end of active employment or the end of employer coverage, whichever comes first. COBRA does not extend it. Retiree coverage does not extend it. Severance-funded benefits do not extend it. Someone who elects 18 months of COBRA at 66 and enrolls in Part B afterward has missed the window by ten months, must wait for the General Enrollment Period running January 1 through March 31, and pays a permanent penalty.

That penalty is 10% of the standard Part B premium for each full 12-month period of delay. At the 2026 standard premium of $202.90, a two-year delay produces a 20% surcharge — roughly $243.50 monthly, for life. Medicare’s own guidance is explicit that the eight-month clock runs whether or not you take COBRA. The full mechanics of Medicare enrollment deadlines and penalties are worth reading before you sign a COBRA election form.

Part D operates on a tighter clock still: 63 days without creditable drug coverage triggers a separate permanent penalty. Because the windows differ, handle both filings at once. Anyone over 65 who is offered COBRA should also confirm how Medicare coordination with employer coverage applies to them, since Medicare becomes the primary payer once active employment ends — and a plan that discovers you lacked Part B can claw back what it paid.

For those under 65 but close to it, the sequencing question is which supplemental structure to enter at 65. Comparing Medigap versus Medicare Advantage annual costs during the bridge period gives you time to decide before your one-time Medigap guaranteed-issue window opens.

What Most People Get Wrong

Mistake 1: Treating the 60-day COBRA election window as a deadline to hit early. It is a deadline to hit late. COBRA is retroactive — elect on day 58 and coverage backdates to the day after your group plan ended, with no gap. If you incur no claims during those weeks, you have effectively held free catastrophic protection and can then decline. Correct action: use the full 60 days to shop, and note that you have another 45 days after electing to make the first payment.

Mistake 2: Assuming the Marketplace special enrollment period expires when COBRA starts. It does not. The special enrollment period opens 60 days before your employer plan ends and runs 60 days after, regardless of whether you elected COBRA. Separately, exhausting COBRA at the end of its 18 months is itself a qualifying event. Correct action: mark both dates on a calendar the week you are separated.

Mistake 3: Estimating Marketplace income from the wrong base. Subsidy eligibility uses projected modified adjusted gross income for the full calendar year, not your current monthly rate. Severance, accrued PTO payouts, stock vesting, and retirement account withdrawals all count. Underestimating means repaying the credit at filing. Correct action: build the full-year projection including every one-time payment before you enroll.

Mistake 4: Dropping HSA contributions during the gap. If your bridge plan is HSA-qualified, 2026 allows $4,400 for self-only and $8,750 for family coverage under IRS Revenue Procedure 2025-19, plus a $1,000 catch-up at 55 or older. Contributions are prorated by eligible months, and the deduction is available whether or not you itemize. Correct action: confirm the plan meets the 2026 minimum deductible of $1,700 self-only or $3,400 family before assuming eligibility.

Mistake 5: Letting a mid-year switch reset a nearly-met deductible. A worker who has satisfied $1,600 of a $1,886 deductible by June and moves to a Marketplace plan starts over at zero — while the 2026 average Marketplace deductible sits at $3,786. Correct action: price the remaining deductible exposure, not just the premium difference, when the gap begins after March.

Is COBRA Worth It? A Conditional Framework

Elect COBRA when at least two of these hold: your projected 2026 income exceeds 400% of the federal poverty level; you are mid-treatment with a specialist who is out of network on every available Marketplace plan; you have satisfied more than half your annual deductible; your gap is under three months and the administrative friction of switching twice exceeds the savings; or your former employer is subsidizing premiums as part of a severance package.

Choose the Marketplace when your projected income falls below 400% of poverty — and particularly below 250%, where cost-sharing reductions apply. Choose it also when your gap exceeds six months, when your household includes dependents who might qualify for Medicaid or CHIP separately from your own coverage, or when the COBRA quote exceeds 15% of your projected monthly income.

The employer-subsidy case deserves emphasis because it is common and misunderstood. If a severance agreement covers three months of COBRA and you then have to pay full freight, the end of that subsidy triggers its own special enrollment period. You are not locked in. Take the subsidized months, then move to the Marketplace when the bill arrives.

Neither option is right if you are over 65 and have not filed for Part B. That is a sequencing question, not a cost question, and it comes first.

How We Researched This Article

Every figure in this article was drawn from a named primary source and verified before publication. Cost-of-coverage baselines come from the KFF 2025 Employer Health Benefits Survey, which reflects 1,862 interviews with non-federal public and private firms and is the standard benchmark for employer-sponsored premium data. COBRA rules — the 102% ceiling, the 150% disability multiplier, the 60-day election window, the 45-day initial payment period, and the 20-employee applicability threshold — come from the U.S. Department of Labor’s COBRA guidance for workers.

Marketplace figures — the 58% increase in average net premium payments, the $3,786 average deductible, and the enrollment shifts by income band — come from KFF’s May 2026 analysis of CMS Open Enrollment data. The statutory background on the expiration of enhanced premium tax credits comes from the Congressional Research Service. Poverty guidelines come from HHS’s Office of the Assistant Secretary for Planning and Evaluation. Medicare premium, deductible, and penalty figures come from the CMS 2026 Parts A and B fact sheet released November 14, 2025, and from Medicare.gov’s late enrollment penalty guidance. Health savings account limits come from IRS Revenue Procedure 2025-19.

Three limitations deserve stating plainly. First, all COBRA dollar figures in this article are modeled, not measured: they apply the statutory multiplier to national average premiums, because no federal agency publishes a national COBRA premium average. Your quote will differ, and plans may charge below the ceiling. Second, employer premium data reflects 2025, the most recent survey year available; 2026 figures publish in the fall. Third, short-term plan rules are genuinely in flux — the 2024 federal rule remains on the books, but the tri-agencies suspended enforcement priority in August 2025, so state law governs in practice and varies widely. Research was last conducted in July 2026.

All figures were verified against named primary sources before publication.