COBRA Administration vs Private Health Insurance Continuation

Figuring out the best way to handle health insurance after an employee leaves isn’t just a policy choice—it’s something that affects your compliance risks, your HR team’s workload, and how supported your people feel at a tough time.

COBRA lets former employees keep their job-based coverage, but managing it in-house often turns into a paperwork headache. Meanwhile, private health insurance options—like ACA Marketplace plans—give workers more freedom but leave employers with little to no oversight.

So, how do you choose between structure and simplicity? Between control and convenience?

This comparison is here to help make that choice clearer. It breaks down the key differences between COBRA administration and private health insurance continuation—what each means for your compliance needs, your team’s time, and your employees’ well-being.

COBRA, short for the Consolidated Omnibus Budget Reconciliation Act, gives eligible employees and their dependents the option to keep their group health coverage after leaving a job. It usually kicks in after voluntary or involuntary job loss, reduced hours, or certain life events like divorce.

For most employers with 20 or more staff, offering COBRA isn’t optional—it’s a legal must. Coverage typically lasts up to 18 months, though it can extend up to 36 months in specific situations.

Now, while COBRA helps maintain continuity, the catch is in the compliance. Employers are responsible for sending timely notices, tracking election periods, collecting payments, and keeping detailed records. A late notice or misstep could lead to penalties, sometimes hitting $100 a day per person affected.

Costs? They’re usually passed to the former employee, who pays the full premium plus a 2% admin fee. Still, keeping things running smoothly often falls back on the HR team—unless they partner with a provider like MyCOBRAHelp, who offer expert support with COBRA administration.

Private health insurance continuation usually refers to options outside of employer-sponsored coverage, like those available through the ACA Marketplace. These plans offer a fresh start—new coverage, different networks, and often income-based subsidies. For employees who lose job-based insurance, it’s an alternative that’s sometimes cheaper, but not always simpler.

After losing their job, most people qualify for a special enrollment period, but they only get 60 days to act. Missing that window can mean waiting months for the next open enrollment. Compared to COBRA, which comes with familiar coverage and known providers, ACA plans might introduce different deductibles, copays, or formularies—things that matter when someone’s already managing ongoing care.

From a cost angle, ACA plans can be more affordable if subsidies apply. But for those who earn a bit too much, the price jump can be surprising. And for employers? There’s no obligation to be involved at all, which might sound ideal, but it also means no visibility, no oversight, and no way to guide the process.

Regardless of ACA plan availability, most employers are legally obligated to provide either COBRA or state continuation benefits as an option, and let the employee decide between continuation coverage or an ACA plan.

This is where the gap between COBRA and private health plans gets wide.

With COBRA, employers have a defined list of duties. You’re expected to notify eligible individuals, track election timelines, and maintain detailed documentation. Skipping a step—or even just sending something late—could trigger penalties that add up quickly. The IRS can fine $100 per day, per person, which becomes a serious issue if overlooked.

By contrast, private health insurance continuation, like ACA Marketplace plans, places some of the burden on the individual. Employees will have to shop around for their own ACA plans if opting out of continuation coverage benefits under COBRA. Still, employers aren’t completely off the hook when it comes to notification requirements of COBRA and state continuation for groups under 20 employees even when the employee chooses to opt into ACA plans.

This is why it is a federal requirement to include information regarding the marketplace insurance exchanges in the COBRA Election Notices sent to employees who experience COBRA qualifying events.

For employees in the middle of treatment or managing chronic conditions, consistency matters—a lot.

COBRA keeps people on the exact same plan they had while employed. Same network, same benefits, same providers. So, for someone seeing a specialist or juggling multiple prescriptions, there’s virtually no disruption. It’s the closest thing to hitting pause on their health insurance rather than switching tracks.

With private health insurance continuation—say, through an ACA plan—it’s a bit more unpredictable. Coverage varies by carrier and location, and the new plan might not include the same doctors or medications. That shift can lead to delays, unexpected costs, or the hassle of finding a new care team.

So, while ACA plans sometimes win on price, COBRA tends to win on continuity. And for HR teams focused on employee welfare during offboarding, that continuity could be the piece that matters most.

Change is rarely smooth, especially when health coverage is involved.

With COBRA, employees stick with what they know. They’re already familiar with the plan structure, the portal, the co-pays, and which doctors are in-network. That familiarity can reduce stress at a time when someone’s already facing job loss or a major life event.

The process, too, is fairly straightforward—when it’s managed well. They get a notice, they make their election, and coverage continues without the need to shop around. Add a third-party administrator into the mix, and much of the admin burden shifts off HR’s plate, which tends to be a relief all around.

Now compare that to ACA options. Employees must research plans, compare premiums and benefits, create accounts, and meet tight enrollment deadlines. For those unfamiliar with healthcare terms or platforms, it can feel like trying to make sense of a new system overnight.

So, from a transition standpoint, COBRA usually feels easier, even if it’s more expensive.

Timing matters—especially when someone’s health is on the line.

With COBRA, coverage is retroactive. That means even if an employee waits a few weeks to elect it, as long as they sign up within the allowed window, their coverage still dates back to the day they lost their job-based insurance. For someone needing immediate care, that backdating can make all the difference.

ACA plans, though, don’t work the same way. Coverage typically begins on the first day of the following month after enrolment. So, if an employee signs up on the 2nd of May, they may not be covered until the 1st of June. That gap? It could be problematic, especially for those with urgent medical needs.

Employers looking to help employees avoid these lapses might steer them toward COBRA, at least as a stopgap, while they consider other options. It’s not always the cheaper path, but in terms of activation speed and protection, it’s usually the faster safety net.

When employees leave, HR teams don’t always step back—they’re often the ones fielding calls when coverage gets confusing.

With COBRA, there’s structure. Employers know who’s eligible, when notices go out, and what needs tracking. And with the right third-party administrator—like CobraHelp—there’s hands-on support, not just for compliance but for employee queries, too. That direct line helps avoid the frustration that usually comes with generic call centres or bundled service desks.

Private health insurance continuation, on the other hand, removes employers from the equation entirely. That might sound easier, but it also means giving up visibility. If a former employee has issues signing up for a plan or misunderstands their options, there’s not much HR can do to help.

So, for businesses that care about offboarding experience and want fewer calls chasing benefits questions, COBRA offers more control, along with expert support when managed well.

Behind the scenes, the difference in workload between COBRA and private insurance continuation is pretty stark.

COBRA comes with built-in responsibilities. There are deadlines to monitor, payments to track, and notices that need to be accurate and on time. For HR teams already juggling a lot, that’s not nothing. But it’s manageable—especially with support from a dedicated third-party like MyCOBRAHelp, which takes over much of the admin burden through streamlined tools and specialist guidance.

Private insurance continuation doesn’t demand any of that. Employers aren’t involved in the enrollment, don’t need to send reminders, and don’t carry the risk of getting it wrong. That can feel like freedom, but it also means there’s no way to check in or assist if something goes off track.

Either way, it’s worth pausing to ensure your HR team understands the differences between continuation coverage and ACA coverage options. It is also important that they know what your people actually need, and the compliance requirements for handling post-employment benefits coverage. If you’re unsure, contact us at CobraHelp. We’ll walk you through it with clarity and no jargon.