Overview

Losing employer-sponsored insurance or leaving a job before new coverage starts creates a common and stressful gap: who pays for care if you get sick? You have several short-term options — COBRA continuation, a plan through the ACA marketplace, Medicaid (if eligible), or a private short-term medical policy. Each choice has trade-offs in cost, benefits, and eligibility. In my 15 years as a CFP®, I’ve helped clients weigh these options against their health needs and budgets; the right decision usually balances immediate protection with longer-term access to care.

Quick comparison of the main short-term options

  • COBRA continuation: Keeps your employer’s plan for a limited time (typically up to 18 months for most qualifying events; some situations extend to 36 months). You generally pay the full premium plus up to a 2% administrative fee. Suitable when you want identical coverage to your prior employer plan. (See the Department of Labor’s COBRA overview.)
  • ACA marketplace plan (special enrollment): Losing job-based coverage qualifies you for a special enrollment period to buy an ACA-compliant plan; plans cover essential health benefits and can include premium subsidies based on income. This is usually the best option for more-complete coverage at potentially lower net cost. (See Healthcare.gov special enrollment.)
  • Medicaid/CHIP: If your income is low enough, you may qualify for Medicaid or CHIP immediately after job loss. Eligibility varies by state; these programs often offer little or no premiums and low out-of-pocket costs. (See Healthcare.gov/Medicaid.)
  • Short-term (short-term limited duration) plans: Private plans that can start quickly and cost less in premium but generally exclude pre-existing conditions, preventive care, maternity care, and many medications. Some states restrict their length or sale. Useful for brief gaps but risky if you have ongoing health needs. (Kaiser Family Foundation has a helpful primer on these plans.)

When to choose COBRA

COBRA is often the right choice when:

  • You need continuity of care with your current doctors or ongoing treatment (e.g., cancer care, pregnancy, chronic conditions).
  • Your employer plan has unusually broad benefits or unusually low out-of-pocket maximums that would be expensive to replicate on the marketplace.

Caveats: COBRA premiums can be high because you pay the full employer-plus-employee share. However, for people with important ongoing care needs, the predictable coverage and network continuity can justify the cost. For details on qualifying events, coverage length, and rights, review the Department of Labor’s COBRA guidance.

When the ACA marketplace is a better fit

If you don’t need exact continuity of your employer plan and you want guaranteed coverage for pre-existing conditions, the ACA marketplace is often best. Benefits include:

  • Coverage of essential health benefits (preventive care, mental health, maternity care, prescription drugs).
  • Protections for pre-existing conditions.
  • Potential premium tax credits that lower monthly costs if your income qualifies.

Losing employer coverage generally triggers a 60-day special enrollment period at HealthCare.gov or your state marketplace. Even if you plan to use a short-term plan for a month or two, check marketplace options before you enroll elsewhere; the marketplace may be cheaper once subsidies are applied. (Healthcare.gov – Special Enrollment Period.)

When Medicaid should be your first stop

If your household income dropped or is low enough after job loss, apply for Medicaid immediately. If eligible, this can provide robust coverage at minimal cost. Eligibility rules and application processes vary by state; file as soon as possible because retroactive coverage may be available for medical care in some states. (Healthcare.gov – Medicaid.)

When short-term plans make sense — and when they don’t

Short-term medical plans can be useful if:

  • Your gap is brief (a few weeks to a few months).
  • You are generally healthy, have no planned medical procedures, and are comfortable accepting exclusions for pre-existing conditions and preventive care.
  • You need something fast with low monthly premiums and you understand the coverage limits.

Short-term plans are a poor choice if you:

  • Have ongoing prescriptions, pregnancy, chronic illnesses, or recent health care claims.
  • Need coverage for preventive care or mental health services.
  • Live in a state that heavily restricts short-term plan sales or duration.

Kaiser Family Foundation and other consumer groups caution that short-term plans can leave people with significant uncovered costs. Check your state rules — several states limit how long short-term plans can be sold or renew them.

Costs and how to compare them

Premiums vary widely by age, location, and level of coverage. Typical ranges in recent years have been roughly $100–$800+ per month for short-term plans depending on age and coverage level; ACA marketplace plans and COBRA can be higher or lower once subsidies and employer contributions are considered.

Compare these items when shopping:

  • Monthly premium and how it changes if you enroll additional family members.
  • Deductible, co-pay, and out-of-pocket maximum.
  • Coverage for prescriptions, emergency care, maternity, mental health, and preventive services.
  • Whether pre-existing conditions are excluded and for how long.
  • Provider network and whether your current doctors are in-network.
  • State regulations that affect plan renewability and maximum duration.

How to enroll: step-by-step

  1. Confirm loss of employer coverage and the exact date coverage ends. This triggers COBRA rights and marketplace special enrollment timing.
  2. Compare COBRA cost (ask HR for the exact premium) versus marketplace plans (enter your household income for subsidy estimates). Use Healthcare.gov or your state marketplace to get subsidy estimates and plan details.
  3. If you might qualify for Medicaid, apply at your state Medicaid website right away.
  4. If you choose a short-term plan, read the policy’s exclusions and termination rules carefully and ask how claim appeals work.
  5. Keep documentation of your enrollment decisions and dates; these documents may be needed for future special enrollment periods or tax returns.

Practical checklist (what I ask clients in my practice)

  • How long will your coverage gap likely be? Short (<3 months), medium (3–12 months), or long (>12 months).
  • Do you have ongoing prescriptions, pregnancy, or planned procedures?
  • Are your current doctors essential to ongoing care?
  • What is your household income now and expected for the year?
  • Can you afford COBRA premiums if that is the only way to keep your provider network?
  • Have you checked marketplace subsidy eligibility?

Answering these in order usually narrows the choice quickly. For example, clients with significant ongoing care often pick COBRA despite higher premiums; healthy adults on a short gap sometimes opt for short-term plans while they price ACA coverage.

Common mistakes and how to avoid them

  • Assuming short-term plans equal ACA coverage. They do not offer the same protections (pre-existing condition coverage, essential benefits).
  • Not checking for a marketplace special enrollment period before buying a short-term plan.
  • Overlooking state-specific rules and penalties. Some states have their own individual mandate or minimum requirements; check state guidance.
  • Letting coverage lapse between COBRA and marketplace start dates—coordinate effective dates to avoid a gap.

Related FinHelp.io resources

Frequently asked questions (short answers)

  • Will a short-term plan cover a pre-existing condition? Usually not. Most short-term plans exclude pre-existing conditions; read the policy.
  • Can I get a marketplace plan outside open enrollment? Yes — losing job-based coverage creates a special enrollment period; you generally have 60 days to sign up.
  • Is COBRA available for small employers? Federal COBRA applies to employers with 20 or more employees; some states have “mini-COBRA” rules for smaller employers.

Bottom line

If you’re between jobs, prioritize decisions based on how much medical care you expect to need and what you can afford. COBRA offers continuity but can be costly; marketplace plans provide comprehensive benefits and financial help if you qualify; Medicaid is the best option if you’re income-eligible; short-term plans can be a stopgap for healthy people for very short gaps but carry meaningful risk. In my practice, the most common smart move is to immediately check marketplace eligibility and COBRA costs, then choose the option that balances continuity of care and financial risk.

Professional disclaimer: This article is educational and not individualized legal, tax, or insurance advice. Rules and prices change; verify current details with Healthcare.gov, your state Medicaid office, the U.S. Department of Labor (COBRA), or a licensed insurance professional before enrolling.

Authoritative sources and further reading