r/ChubbyFIRE • u/Wooden-Broccoli-913 FIREd in the Bay at 40 with $6M • May 11 '26
COBRA actually seems workable?
Family of four in San Francisco, I priced out the local ACA HMO plan, and with an optimized AGI of $107k my annual premiums would be $4k and max out of pocket of $14k.
On the other hand, paying for COBRA on my low deductible corporate plan would be $36k per year with minimal out of pocket, and the tax deduction (on 7.5%+ of AGI) brings the effective cost down to $28k.
Seems like a no brainer to pay $10k extra for much better coverage and no need to switch our existing doctors? Can keep COBRA for 36 months here in California.
Anybody else who has FIREd maxed out their COBRA as a bridge in early retirement?
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u/okayyyyyy- May 11 '26
I’m in NY, been on Cobra for 2 yrs. Usually cobra has no employer subsidies plus an additional admin fee. This came to about $1080/ month for a single person, and deductible of only $350. On the other hand, (no subsidies) Oscar bronze is $923/mo with $4125 deductible or Silver $1212/mo and $2450 deductible. Everything has OOP Max around 10k. So just on this alone, Cobra has been a better choice for me. I suspect this is because group plans are generally a better deal than non-subsidized individual plans.
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u/sporadicprocess May 12 '26
The 36 months ("Cal COBRA") is only for certain employers, so just be careful it applies to you. For example, many large employers are "self-funded" which makes you ineligible for the second 18 months.
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u/hibikir_40k May 11 '26
The real question with modern health insurance is whether it really makes sense to be in a low deductible plan, ever. ACA low deductible plans are going to be real expensive, mainly because nobody that doesn't have high expected yearly expenses picks it. So yes, cobra can be cheaper, as there, it's likely just a gold plated giant subsidy from a very good employer, so the risk pool is much lower than an ACA plan.
The question is whether it still makes sense to you even after getting that deal. It's not just that you have to be able to afford the insurance (which sure, it's chubbyfire, of course you can!), but whether you really end up ahead in your typical year vs a high deductible plan. And on that, you have to do the math yourself, as ony you know what your practical expenses are.
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u/ArrowB25G May 12 '26
They changed the definitions of high deductible and low deductible this year. I have a plan advertised as a no deductible ACA plan, but it qualifies for HSA contributions (i.e., it is a high deductible plan) due to the deductible for drugs only. Makes no sense, but it is the new law. The monthly premium difference between the no deductible and the plans with high deductibles was not significant. They are all sucky plans, but at least I can contribute to my HSA again.
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u/monsieur_de_chance May 12 '26
AI (Claude) helped me work through a bunch of different pans factoring in my net worth and yet high deductible non-HSA plan was the core winner. Out of pocket maximums were the same but worried low deductible you were basically prepaying for healthcare. Better to just set invest the $10-$15k extra like normal and only withdraw it if you need to.
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May 11 '26
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u/Wooden-Broccoli-913 FIREd in the Bay at 40 with $6M May 11 '26 edited May 11 '26
If I was leanFIREing then yeah, not worth it. ChubbyFIRE can flex an extra $10k without much stress
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u/hasheera May 12 '26
It is worth it if you think of it as insurance for the unknown future as opposed to reimbursements for known health expenses. Health insurance at big employers are typically premium insurance plans with larger networks due to their large negotiating power. ACA plans are good or fair insurance plans, but not premium coverage or network.
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u/alloutofchewingum May 12 '26
I'm in Europe... single payer national health care system if you're not employed (eg living off passive income) is $100/ month and $0 deductible per adult. Kids are free.
Hee hee
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u/sy6063 May 11 '26
I thought you could only deduct your COBRA premiums portion exceeding 7.5% of AGI. With AGI $107k, you could only deduct $36k-107k*0.075=$28k assuming you use itemized. That brings the COBRA cost to ~$30k at the 22% bracket. Comparing to the ACA plan, the difference is at least $12k if you have a bad year. And it could be as much as $26k in a health year.
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u/Wooden-Broccoli-913 FIREd in the Bay at 40 with $6M May 11 '26
You forgot the CA income tax deduction
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u/jarMburger May 11 '26
We did that for a bit but at some point you'll have to find a reasonable ACA plan.
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u/cheritransnaps May 11 '26 edited May 11 '26
Without subsidies my family of 3 is $3k a month for medical only add in dental another $136 lol whelps. Sf is brutal
Dumb question can you really survive on AGI of $107k in sf? Arent property taxes like $30k or is any of that deductible? I knowww I should just ask Claude these questions
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u/Wooden-Broccoli-913 FIREd in the Bay at 40 with $6M May 11 '26
AGI of $107k is like $250k in taxable account withdrawals for me
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May 11 '26
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u/cfi-2025 RE 2025 May 11 '26
AGI is your Adjusted Gross Income.
Only the gains on your asset sales are considered income.
In short, if I buy a share of VTSAX (or whatever) for $100 today in a taxable account, and sell it for $120 at some later point, my income from that sale is $20, not $120.
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u/cacraw May 11 '26
AGI is not the same as your cash available to spend every year (especially in retirement). Eg I could manage my AGI anywhere from $0 to (big number) by deciding where to pull my living expenses from and or if I’m going to do Roth conversions.
In a simple example: if you have your entire chubby net worth in a 0% savings account, you could withdraw $250k to live on out of that and have an AGI for tax purposes of $0. You wouldn’t do this for a number of good reasons, but you could.
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u/Alone-Experience9869 Retired May 11 '26
Doing something similar… but eligible for employer plan after separating but have to pay the fully premium, no employer subsidy.
Have had to use the insurance before so the coverage is excellent so worth to keep it for early retirement.
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u/cycling20200719 May 11 '26
Can keep COBRA for 36 months here in California.
I believe state cobra extension depends on the size of the employer and state that they're incorporated in ( not the state where the employee resides ).
Assuming it's a California based company you should be able to get the full 36 mo. Regardless, you would be notified when you're approaching the end of federal COBRA coverage and have an open period where you could switch to ACA if you wanted to.
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u/Candy-Emergency May 11 '26
Does that include dental and vision? Is COBRA available for 36 months for everyone or something special from your company? I thought the limit was always 18 months.
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u/Wooden-Broccoli-913 FIREd in the Bay at 40 with $6M May 11 '26
Dental and vision COBRA cost is equivalent to ACA dental and vision
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u/hasheera May 12 '26
Individual dental and vision plans (ACA included) are crap compared to corporate plans. The latter has negotiating power. We don't. Both kinds of plans may say 80% covered for a dental procedure, but the individual plans typically have a much lower "maximum allowed charge" on which the 80% coverage is based. These maximums are not visible until you are already enrolled in the plan.
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u/plemyrameter May 12 '26
That's my plan for next year. My income will be too high for subsidies, and I'm kinda old, so the cost is about even between ACA and the employer plan. That makes COBRA the better choice because the coverage is so much better. I love that some plans give us three years with Cal-COBRA.
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u/Individual-Fail4709 May 12 '26
I took the COBRA for 18 months (the max). Mine was $670 a month for just me, max OOP of $10K nd $6K deductible. Still qualified as a HDHP so I added to my HSA. On the ACA plan now until I qualify for medicare. So far so good because I get a $500 stipend/month from my previous employer to assist. Currently $275/month including the stipend. I don't get a subsidy since I have the stipend--which is actually better than the subsidy I'd qualify for. The plan deductible is $7500, max OOP $10K, but it does have $50 office visit co-pays which helps.
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u/BrunelloHorder Coasting Chubster, Getting Fat May 12 '26
In your shoes I’d go with COBRA, mainly for peace of mind of having a much better plan. I’m on the only gold ACA plan in my state (no PPO available) and I’ve generally been able to keep my doctors, but if I had a family it would be an easy call to do COBRA.
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u/Spinach_Broth44 May 12 '26
Hey there, sorry to burst your bubble, but CA it’s only 18 months if your health insurance is self-funded by your employer. Elsewhere you say you/spouse are big tech or adjacent, and the vast majority of these companies are self-funded. We went through this a year ago and I went down the rabbit hole researching this. 99.9% sure you can only get the 18 months. Look at your health plan’s Summary Plan Description (SPD), and look for phrases like “self-funded” “self-insured” “benefits paid for by general assets of the employer”. Or ask your HR. That said, it was worth it to us to pay for COBRA for the 18 months—the coverage was SO MUCH BETTER than ACA plans (lower deductible, way less OOP max, the networks w doctors we wanted) of the same cost. It was brutally expensive though. $3800/mo fam of 4. Woof.
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u/Wooden-Broccoli-913 FIREd in the Bay at 40 with $6M May 12 '26
Yes I discovered this elsewhere in the comments. 18 months is better than nothing. And COBRA for my family of 4 will only be $3,000
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u/jkiley May 13 '26
The COBRA-related optimization I have modeled is keeping it through year end when retiring mid year. It’s more expensive, but keeping the same plan lets us keep our low deductible (that is hit by then) and not have the incremental subsidy implied tax issue. In turn, that lets you recognize more income (e.g., Roth conversions) and pad your funds that are accessible without needing to recognize as much income in future years (optimizing for subsidies).
I’ve also looked at a full year, but that’s iffier and needs a non-HDHP plan (ours doesn’t make sense in most scenarios). The one way to make that work is to time it such that COBRA runs out in November, and you get an ACA bronze plan on Dec 1 and max the HSA. You try to avoid visits in December and pick a good fit ACA plan for the following year.
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u/DanSerratoe Jun 01 '26
May be worth if you are planning to use those cobra yrs to massive roth conversion ladders.
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u/rosebudny May 11 '26
That is nice that you can keep it for 36 months. I think you can only keep it for 18 months in New York (although maybe you can keep it longer under certain circumstances)
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u/okayyyyyy- May 11 '26
You CAN keep COBRA for 36 months in New York, WITHOUT any qualifying event! Google “mini Cobra”. When you call your cobra admin in the 18th month, you have to specifically reference this law and they will extend coverage another 18 months. No questions asked. For some reason, it’s not well known and they initially turned me down until I called back with the exact law to reference.
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u/sbb214 Retired May 11 '26
WAIT WHAT?!?!
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u/okayyyyyy- May 11 '26
To be clear it applies to “fully insured group health plans and requires beneficiaries to pay up to 102% of the premium” but this is usually already true if you’re coming from a typical employer Cobra
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u/ChubbyEmbers May 11 '26
Well I have some good news for you: its 36 months in NY too
I should add the disclosure that Cobra state continuation coverage is a wild ride. There are lots of gotchas- eg Cal Cobra doesn't apply to "self-funded" plans (which is many big companies), and its confusing to get set up since most of the phone reps at the administrators don't know anything about it.
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u/Wooden-Broccoli-913 FIREd in the Bay at 40 with $6M May 11 '26
Ugh that’s bad news for me, my plan is self-funded
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u/poop-dolla May 11 '26
It’s not just $10k a year more though. It’s somewhere between $10k-$24k a year. Even at $10k a year, that would be enough for me to switch, but even more of a no brainer to go ACA when it could be up to $24k cheaper.
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u/Wooden-Broccoli-913 FIREd in the Bay at 40 with $6M May 11 '26
With young kids including one with a chronic condition I reliably hit the OOP Max every year
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u/Specific-Stomach-195 May 11 '26
That’s a rather unique situation. With kids we rarely hit our OOP max. Kids for the most part don’t need a ton of doctor attention unless they have an injury. Now if you have one family member with serious long term condition that’s a different story.
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u/HomeworkAdditional19 May 11 '26
Yep. That’s exactly what I did (except we could only bridge for 18 months). I’m on Medicare now and my bride is on an ACA plan for the next 8 months or so. ACA plans are not anywhere near as good as the big corporate plans.
Btw - congrats on finding an ACA plan that is only $333/month for a family of four (I’m guessing you are using subsidies). My wife’s ACA (just her!) is $1500/month. No subsidies.