ICHRA vs COBRA: what's the difference?

They solve different problems

COBRA is a federal right to continue your former employer''s group coverage for a limited time after leaving a job — but you typically pay the entire premium yourself, which is expensive. An ICHRA is an ongoing benefit a current employer offers, funding an individual plan you choose. So COBRA is a bridge after leaving a job; an ICHRA is a benefit while employed.

What COBRA is

COBRA lets you keep your exact former group plan — same network, same benefits — for a limited period (often up to 18 months). The catch is cost: you pay the full premium, including the share your employer used to cover, plus a small administrative fee. For family coverage that can run well over a thousand dollars a month.

What an ICHRA is

An ICHRA is employer-funded. A current employer sets a tax-free monthly allowance and you buy an individual plan with it. Unlike COBRA, it''s not a continuation of an old plan — it''s ongoing, employer-supported coverage you choose from the individual market.

Cost comparison

COBRA usually means paying the full group premium yourself, with no employer contribution. With an ICHRA, the employer funds a tax-free allowance toward an individual plan — frequently a lower net cost, especially if a comparable marketplace plan is cheaper than the old group plan. For many people leaving a job, an individual plan (with or without a subsidy) beats COBRA on price.

When COBRA still makes sense

• You''re mid-treatment and need to keep the exact same plan and doctors short-term.
• The gap to your next coverage is brief.
• You''ve already met your deductible for the year on the current plan.

When an ICHRA wins

• Your new employer offers one — it''s funded coverage, not full-price continuation.
• You want ongoing, predictable, employer-supported benefits.
• A comparable individual plan costs less than COBRA.

The transition after leaving a job

Losing job-based coverage triggers a Special Enrollment Period, so you can buy an individual plan on the marketplace right away — and if your new employer offers an ICHRA, that allowance funds it. Comparing COBRA against an ICHRA-funded (or subsidized) individual plan is worth doing before you default to COBRA, since the individual route is often cheaper.

Subsidies: COBRA vs. an individual plan

Leaving a job opens a special enrollment period on the individual market, and a marketplace plan may qualify for a premium tax credit based on income. COBRA, by contrast, usually does not come with a subsidy — you typically pay the full premium plus an administrative fee. For many people that makes an individual plan the cheaper path once employer coverage ends.

For employers: offering an ICHRA vs. administering COBRA

An ICHRA shifts employees onto their own individual plans, which can simplify some of the continuation headaches a group plan creates. Note, though, that an ICHRA is itself a group health plan, so COBRA-style continuation can apply to the ICHRA in certain situations. A broker can help you structure this correctly.

A realistic transition example

Illustrative only. An employee leaving a job could elect COBRA to keep their exact plan at full cost, or use their special enrollment period to buy a comparable individual plan — potentially with a subsidy that COBRA would not offer. The right choice depends on the premium difference, whether they want to keep their current doctors, and their income.