Laid Off in Houston? COBRA vs. a Marketplace Plan vs. Medicare — the 60-Day Decision

The packet arrives a week or two after your last day. It is thick, it is written in benefits language, and it carries a deadline you will not notice unless you go looking for it. Most people read enough to learn that COBRA will cost roughly four times what they were paying, put it on the kitchen counter, and come back to it later.

Later is the problem. Losing job-based coverage starts three separate clocks at once, and they run at different speeds toward different doors. Two of them close in 60 days. One of them, if you are 65 or older, can attach a penalty to your Medicare premium for the rest of your life.

This guide lays out the three options a Houston household actually has — COBRA, a Marketplace plan, and Medicare — what each costs, which deadline governs it, and how to tell quickly which one is yours. It is written for Harris County, where the Marketplace is the federal one at HealthCare.gov and continuation coverage is governed by both federal law and the Texas Insurance Code.

The short answer: you have 60 days to elect COBRA and 60 days to pick a Marketplace plan, and both clocks start from roughly the same point. COBRA keeps your exact plan, doctors and deductible progress, at up to 102% of the full premium. A Marketplace plan usually costs far less because of the premium tax credit, but changes your network and restarts your deductible. If you are 65 or older, COBRA is not coverage based on current employment — taking it instead of Part B can trigger a lifetime late enrollment penalty.

The three clocks that start when coverage ends

Almost every expensive mistake in this area comes from assuming one deadline governs everything. Three run in parallel.

The retroactivity of COBRA is genuinely useful and widely misunderstood. Because electing COBRA reaches back to the day coverage ended, and because you then have 45 days to pay, you can spend several weeks deciding without being uninsured in the meantime. If nothing happens, you can decline and never pay a premium. If someone lands in a Memorial Hermann or Houston Methodist emergency room in week three, you can elect, pay, and have the claim covered.

That is a real option worth understanding — effectively a decision window with a safety net attached. It only works if you do not let the 60 days lapse.

What COBRA actually costs, and how long it lasts

The sticker shock is not the plan getting more expensive. It is seeing the true price for the first time. While you were employed, your employer paid a large share of the premium and you saw only your payroll deduction. COBRA charges you the whole thing.

Federal law permits a plan to charge up to 102% of the total cost — your old share, plus the employer’s share, plus a 2% administrative fee. For the 11 extra months available through a disability extension, the plan may charge up to 150%.

Federal COBRA applies to employers with 20 or more employees. Below that threshold, federal COBRA does not apply at all — see the Texas section below.

Two structural points people miss. First, COBRA is not all-or-nothing by person: an individual family member can elect it independently, which occasionally makes sense if one person is mid-treatment and everyone else is healthy. Second, your deductible and out-of-pocket accumulator carry over, because it is literally the same plan year on the same plan. If you are in October and have already met a $4,000 deductible, starting fresh on a new plan means paying that deductible twice in one calendar year.

When COBRA is the right call

COBRA gets a reputation as the expensive option people take when they do not know better. Sometimes it is exactly right:

• You are mid-treatment. An active course of chemotherapy, a scheduled surgery, a pregnancy in its third trimester — continuity of provider and plan matters more than premium.
• You have met most of your deductible. Late in the plan year, restarting the accumulator on a new plan can cost more than the COBRA premium difference.
• Your specialists are not in any Marketplace network. Worth verifying rather than assuming, in either direction.
• The gap is short. A new job starting in six weeks with a first-of-month benefits start is a straightforward bridge.
• Your employer is subsidizing it. Severance packages sometimes cover several months of COBRA. Read the agreement — and note the point below about subsidies ending.

And when it is usually wrong: your income has dropped sharply, nobody in the household is mid-treatment, and the premium would consume a large share of what you have coming in. That is the classic Marketplace case.

The Marketplace option

Losing job-based coverage opens a Special Enrollment Period at HealthCare.gov. You have 60 days from the date coverage ends to choose a plan, and coverage can begin the first day of the month after the loss.

The reason this is usually cheaper is the premium tax credit, which is based on household income for the year and the size of your household. A mid-year job loss often lowers your projected annual income substantially, and the credit is calculated on what you now expect to earn — not on what you were making in March. This is the single most common reason people overestimate what a Marketplace plan will cost them.

Estimate the whole year honestly, including any severance, unemployment compensation and retirement distributions. Your credit is reconciled against your actual income when you file, so an estimate that is too low can mean paying money back. We cover that reconciliation in our guide to Form 8962, and the process for updating your estimate in reporting income changes.

Two things a Marketplace plan will almost certainly change:

• Your network. Harris County Marketplace plans are predominantly HMO and EPO designs with tighter networks than a large employer’s PPO. Check every provider you intend to keep. Our guide to HMO, EPO and PPO networks in Houston covers what each restricts.
• Your deductible. A new plan means a new accumulator, regardless of what you have already spent this year.

One structural feature worth knowing: if your income puts you in the range where cost-sharing reductions apply, those attach only to silver plans. A silver plan that looks more expensive on premium alone can carry a much lower deductible and out-of-pocket maximum than a bronze plan. We work through that comparison in silver versus bronze for Houston households.

Texas state continuation for small employers

Federal COBRA reaches employers with 20 or more employees. A great many Houston workers are employed below that line — and Texas law fills part of the gap.

Under the Texas Insurance Code, state continuation applies to employers of any size. The duration depends on your federal COBRA status:

Two important limits. State continuation applies only to health plans issued by licensed insurance companies and HMOs subject to the Texas Insurance Code. It does not apply to employer self-funded ERISA plans, which are exempt from state insurance law — and many mid-sized and large Houston employers self-fund. You pay the full premium either way.

Your carrier is responsible for offering continuation and providing timely notice. If you worked for a small employer and received nothing, ask the carrier directly rather than assuming the option does not exist. The Texas Department of Insurance can help if a carrier is unresponsive.

If you are 65 or older: the trap

This section is the reason this article exists, because the mistake is common, quiet, and permanent.

Medicare treats COBRA differently from how you might reasonably expect. COBRA and retiree coverage are not considered coverage based on current employment. That single distinction drives everything below.

While you are actively working past 65 with employer coverage from an employer of sufficient size, you can generally delay Part B without penalty. When that employment ends, an 8-month Special Enrollment Period opens for Part B. It starts when the employment ends or the group coverage ends, whichever happens first — and electing COBRA does not pause, extend or restart it.

So the failure mode looks like this: someone retires at 66, elects 18 months of COBRA because it is familiar, and enrolls in Part B when COBRA runs out. By then the 8-month window has been closed for ten months. The consequences:

• They must wait for the General Enrollment Period, January 1 through March 31, with coverage starting the month after they sign up — a gap of months.
• They owe a lifetime Part B late enrollment penalty: 10% of the standard premium for each full 12-month period they could have had Part B and did not.

Against a 2026 standard Part B premium of $202.90 a month, a 10% penalty is roughly $20 a month — for life, rising as the premium rises. Two full years late is 20%.

There is a second wrinkle. Once you are entitled to Medicare, COBRA generally becomes secondary. You may find yourself paying full freight for coverage that is now paying second on your claims. If you are 65 or older and lose job-based coverage, the default assumption should be enroll in Part B within the 8-month window, and treat COBRA as a supplement to that decision rather than a replacement for it.

Our guide to working past 65 and delaying Part B covers the rules while you are still employed, and the General Enrollment Period and late penalties covers what happens if the window has already closed.

Switching between COBRA and the Marketplace

The rules here are specific, and getting them wrong leaves people uninsured.

The bottom two rows are where people get hurt. Dropping COBRA in June because it has become unaffordable does not open a Special Enrollment Period — you would generally wait for Open Enrollment, which for 2027 coverage begins November 1, 2026. That can mean months uninsured.

The practical lesson: make the COBRA-versus-Marketplace decision once, at the start, inside the 60-day window, rather than electing COBRA as a default and revisiting it when the bills arrive. If a severance agreement subsidizes COBRA for a set number of months, find out what happens when the subsidy ends — the end of an employer contribution is itself a qualifying event.

Three Houston households, worked through

1. A 34-year-old software worker, laid off in September

Healthy, no ongoing treatment, severance through November, expecting to job-hunt for three to four months. COBRA quoted at about $650 a month for single coverage.

The Marketplace is the likely answer. Her projected annual income has dropped, which raises her premium tax credit for the remainder of the year. The only real check is her network: if she wants to keep a particular primary care doctor, she should confirm participation before enrolling. She should also use the retroactive feature deliberately — she does not have to elect COBRA on day one to stay protected while she compares, as long as she stays inside the 60 days.

2. A 48-year-old with a spouse mid-treatment

His wife is midway through a treatment course at a Texas Medical Center institution, and they have met most of a $6,000 family deductible. COBRA is $1,900 a month.

COBRA is probably right, at least through the end of the plan year. Switching plans now restarts the deductible and risks disrupting an active treatment relationship. The calculation changes at the plan-year boundary, when the accumulator resets anyway — that is the moment to re-run the comparison, and the exhaustion of COBRA later will itself open a Special Enrollment Period.

3. A 67-year-old whose position was eliminated

She has been working past 65 with employer coverage and never enrolled in Part B. HR offered COBRA and said nothing about Medicare.

She should enroll in Part B now, inside the 8-month Special Enrollment Period that opened when her coverage ended. Waiting until COBRA ends in 18 months would close that window and attach a lifetime penalty. With Part B in place she can then consider a Medigap policy — her guaranteed issue rights are time-sensitive too — or a Medicare Advantage plan. Our Medicare eligibility page covers where to start.

A 10-day action plan

1. Find the date your coverage actually ended. Often the last day of the month of separation, not your last day worked. Every clock runs from here.
2. Locate the COBRA election notice and write both deadlines on it: 60 days to elect, 45 days after that to pay.
3. If you are 65 or older, deal with Part B first. Everything else is secondary to that 8-month window.
4. Get the real COBRA number — total monthly premium for the people you need covered, not your old payroll deduction.
5. Estimate your household income for the full calendar year, including severance and unemployment.
6. Price Marketplace plans with that estimate, and look at silver specifically if cost-sharing reductions may apply.
7. Check every doctor and prescription against any plan you are considering.
8. Add up the year, not the month: premium plus the deductible you would restart, against COBRA’s premium with your accumulator intact.
9. If the employer was small, ask about Texas state continuation — up to nine months where federal COBRA does not apply.
10. Decide inside the window. Electing COBRA and cancelling later does not open a Marketplace door.

Frequently asked questions

Talk it through with someone local

The COBRA-versus-Marketplace question looks like arithmetic, and partly it is. But the inputs that decide it — whether your specialists are in a given network, how much of your deductible you have already spent, whether anyone is mid-treatment, and whether Medicare is in play — are specific to your household and not obvious from a premium quote.

If you have an election notice in front of you and a deadline you are not certain about, that is worth a phone call. Reach us at 832-400-6538 or sara@wisehealthins.com, or start with our health insurance page or our employer health insurance page if you are on the other side of this as a business owner. We serve clients from North Houston and South Houston.

Wise Insurance Agency is an independent insurance agency licensed in Texas. We do not offer every plan available in your area. Any information we provide is limited to the plans we do offer in your area. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Assistance Program for information on all of your options. This article is general information, not medical, legal or tax advice. COBRA rights depend on your specific plan documents; confirm details with your plan administrator.