COBRA Cost vs Employer Health Premium Calculator

What COBRA actually costs versus what your paycheck premium cost

Every other COBRA calculator does the same sum: employee share plus employer share, times 1.02, stop. That gives you the bill. It does not give you the change in your cost, because it compares an after-tax bill against a pre-tax deduction as though the two dollars were the same dollar. They are not, and the gap is usually $30 to $80 a month.

Two things vanish the day you leave. The first is the employer subsidy: the worker contributes roughly 16 percent of a single-coverage premium and 26 percent of a family premium (KFF 2025 Employer Health Benefits Survey), so most of the premium was never on your stub at all. The second is the Section 125 tax break on the slice that was.

Run the page defaults end to end. A $55 biweekly deduction is $119.17 a month, the employer's $303 is $656.50 a month, on a $70,000 salary, single, with a 5 percent state rate. Taxable income after the standard deduction lands in the 22 percent bracket, so the combined marginal rate is 22 percent federal plus 6.2 percent Social Security plus 1.45 percent Medicare plus 5 percent state, or 34.65 percent. The premium therefore cost $119.17 times 0.6535, about $77.88 a month of real take-home. COBRA is ($119.17 plus $656.50) times 1.02, or $791.18. The real increase is $713.30 a month, roughly ten times what the stub line was costing you. It splits into $656.50 of lost employer subsidy, $41.29 of lost tax break, and $15.51 of administrative load.

The Section 125 break you lose the day you leave

An employer health premium almost always runs through a Section 125 cafeteria plan, often called a premium-only plan. The money is a salary reduction, so it never becomes wages, and qualified benefits under a cafeteria plan are generally outside federal income tax withholding, Social Security, Medicare, and FUTA (IRS Pub. 15-B). FUTA is the employer's tax, so do not count it as your saving. What you saved was your federal bracket rate, 6.2 percent Social Security up to the 2026 wage base of $184,500, 1.45 percent Medicare with no cap, the 0.9 percent Additional Medicare surtax if your wages cleared the threshold for your filing status, and state income tax in nearly every state.

New Jersey and Pennsylvania are the exceptions. Neither conforms to the federal Section 125 treatment for state wages, so the premium was never state-tax free there and there is no state saving to lose. Turn the toggle off rather than zeroing the state rate: a raise at a new job is fully state-taxed in both states, so the rate still has to stay in the gross-up denominator.

Two details are easy to get wrong. The employer's share was excluded from your income under IRC section 106, so it was never taxed to you and crediting a tax saving on it would double-count the benefit. And the salary reduction quietly lowered the wages posted to your Social Security earnings record for those years, which is the small price of the 6.2 percent you saved. If the marginal rate itself is the confusing part, the marginal vs effective tax rate calculator explains why the saving runs at the marginal rate and never the effective one.

How big a raise it takes to make a new job break even

COBRA comes out of after-tax dollars, so every dollar of increase needs more than a dollar of new salary behind it. The rule is simple: divide the monthly increase by one minus your combined marginal rate on a raise, and that is the extra gross you need. At the defaults, $713.30 divided by 0.6535 is $1,091.51 a month, or about $13,098 a year of additional salary before a new offer leaves you where you were.

The denominator matters. It is the rate on a raise, not the rate the premium was saving you. Those are the same number in most states and different in New Jersey and Pennsylvania, where the state rate drops out of the Section 125 saving but stays in the gross-up. Use the wrong one there and you understate the raise you need by the whole state rate.

A new employer's own health plan changes the arithmetic again, since their premium share is real compensation that never shows up in the salary number. Price the whole package with the total compensation offer calculator, and if you are weighing several offers at once with exact per-state withholding and saved profiles, download the Stub44 Salary Calculator app.

The COBRA clock: 60 days, 45 days, 30 days

You have 60 days to elect, counted from the later of the date coverage is lost or the date the election notice is provided. Coverage is retroactive to the day you lost it, so waiting costs nothing if no claims arrive: people who stay healthy through the election period often never pay a premium at all. After you elect, the plan must give you at least 45 days to make the first payment, and every payment after that carries a 30-day grace period (26 CFR section 54.4980B-8). Plans also have to accept monthly installments, so nobody can demand the whole term up front.

Federal COBRA applies to private employers with 20 or more employees in the prior year. Below that, your state's mini-COBRA law may cover you instead, usually with a shorter window and different pricing. Losing job-based coverage also opens a 60-day Special Enrollment Period on the Marketplace, running on the same clock as your election window, and any subsidy there depends on the income you expect for the year rather than what you used to earn. One more option worth knowing: an existing HSA balance can pay COBRA premiums tax-free (IRC section 223(d)(2)(C)(i)), which effectively restores the pre-tax treatment you just lost, even though you can no longer contribute to it once you are off a high-deductible plan.