How to Get Health Insurance After Losing Your Job
Several avenues could be a potential source of health insurance after you get laid off: coverage through a spouse’s employer, continued coverage from your former employer, COBRA, marketplace health insurance and non-marketplace health insurance. Depending on your age and financial situation, Medicare and Medicaid might also be options. To make sure you’re getting the best coverage available to you at the best price, it’s a good idea to explore each of the following seven options before making a decision.
1. Coverage through a Spouse’s Employer
If you’re married and your spouse is eligible for health insurance through his or her employer, being added to that plan – or switching both of you to that plan, if your spouse was also covered by your former employer – may be the simplest and most affordable option if your spouse’s company pays for a significant portion of the health insurance premiums and the plan offers the coverage you need.
If it isn’t currently the annual open enrollment period, which typically occurs in late fall, you may be eligible for a special enrollment period to sign up for coverage under your spouse’s plan. According to Department of Labor rules, “To have a special enrollment opportunity, you or your dependent must have had other health coverage when you previously declined coverage in the plan in which you now want to enroll. You must request special enrollment within 30 days from the loss of your job-based coverage.”
2. Continued Coverage from Your Former Employer
First, read your termination paperwork carefully and follow up with a call to your former employer’s human resources department if necessary to understand how much longer you’ll be covered under your employer’s plan at the premiums you’re used to paying. Coverage might end immediately or it might continue for a few weeks. If you will retain your health benefits for any amount of time, take care of as many medical needs as possible during this period, such as doctor’s appointments and prescription refills.
If you had a flexible spending account (FSA) at your old job and you spent more of your FSA balance than you had contributed through payroll deductions so far, you usually won’t have to make up the difference when you leave your job. Depending on your employer, you may have a limited window to use any unspent FSA funds after you lose your job. If you sign up for COBRA, you may have the option to continue participating in an FSA as long as you keep making the same regular contributions to it that you previously made through your payroll deductions.
3. COBRA from Your Former Employer
Most employers offer Consolidated Omnibus Budget Reconciliation Act (COBRA) health insurance or another health insurance continuation policy to employees affected by a mass layoff, according to RiseSmart, a leading provider of career transition services. Private-sector companies and state and local governments with 20 or more employees are generally required to offer COBRA. (For more, see What You Need to Know About COBRA Health Insurance.) Under COBRA, if it is available to you, you’re legally entitled to 18 months of continuation coverage after losing your job. Continuation coverage for up to 36 months is available for terminated employees who are eligible for Medicare.
You can also use COBRA to provide continued coverage to your spouse, former spouse and dependent children. One of COBRA’s benefits is that you keep the same plan that you’re familiar with. You already know how it works and you can continue seeing the same healthcare providers that your plan covers. Your health insurance coverage will be identical to what you had before you lost your job, at least until the next open enrollment period, when your former employer may change the health insurance options it offers its employees. Any changes then would also affect you as a COBRA enrollee. The upside is that when your former employer’s open enrollment period begins, you can choose a different plan from your former employer’s options – perhaps one that’s less expensive.
Normally, when you get health insurance through work, the premium you pay is a small percentage of the real premium, and your employer pays the rest. Under COBRA, you’re responsible for the entire premium, so it can be significantly more than you’re used to paying – which just adds insult to injury since you no longer have an income. In addition to paying 100% of the premiums, you may also have to pay a 2% administrative charge. However, RiseSmart found that companies are increasingly offering laid-off workers a lump sum to fully or partially cover COBRA premiums or are paying those premiums directly or reimbursing former workers.
Even if both you and your spouse are eligible for COBRA, you both don’t have to sign up for it. Say, for example, you have a health condition that makes your former employer’s plan worth the money for you to keep, but your spouse is healthy and just needs basic coverage. In that case, you could elect COBRA and your spouse could choose a marketplace plan or get coverage from his or her employer.
You can still apply for marketplace coverage if you are eligible for COBRA. But even if you don’t want to use COBRA long-term because of the cost, you may need to use it for a few weeks to fill the gap between being covered by your former employer and being covered under a marketplace plan. Don’t risk going without coverage for even a day; accidents and illnesses are unpredictable.
Unemployment does not exempt you from the federal government’s requirement that everyone must have health insurance coverage. Make sure you have qualifying coverage so you don’t have to pay penalties. COBRA counts as minimum essential coverage under the Affordable Care Act, so you won’t face health insurance penalties if you have COBRA.
If your employer goes bankrupt and stops offering health insurance to anyone, you aren’t eligible for COBRA. Also, you can lose COBRA if you don’t pay your premiums in full and on time. Pay careful attention to payment due dates so you don’t accidentally lose your coverage.
When your COBRA coverage is running out, you can apply for a marketplace insurance plan even if it isn’t an open enrollment period. If you simply want to end COBRA early – say, because you’ve decided it’s too expensive – you’ll have to wait until open enrollment to purchase a marketplace plan unless you experience another qualifying event, such as moving to another state, that qualifies you for a special enrollment period. Healthcare.gov has a tool to find out if you qualify for a special enrollment period.
4. Marketplace Health Insurance via the ACA
Getting laid off and losing your job-based health insurance makes you eligible to enroll in a marketplace health insurance plan outside of the normal open enrollment period (it’s called a special enrollment period) if you decide not to take COBRA coverage or don’t have that option. You have 60 days from the date you lose your job-based coverage to enroll in a marketplace plan.
Before you start shopping for a marketplace policy, talk to your doctors and find out which insurance plans they accept and which plans they’re in network with. If at all possible, sign up for a plan with one of these companies so you can keep seeing the doctors you already know and like at prices you’re accustomed to.
Your income and household size may qualify you for tax credits that will help make a marketplace plan’s premiums more affordable. However, unemployment benefits and withdrawals from a traditional IRA or 401(k) – but not withdrawals from a Roth IRA or Roth 401(k) – count as income and may reduce the tax credits for which you’re eligible.
Marketplace health insurance premiums and coverage will depend on where you live, your age, your tobacco use, the level of coverage you want (bronze, silver, gold or platinum) and the insurance company you choose. To give one example of what you might pay in 2018, a couple in New York County could get a bronze plan for about $850 per month, a silver plan for about $1,000 per month, a gold plan for about $1,200 per month and a platinum plan for about $1,400 per month. (Learn more in Tips for Finding Affordable Health Insurance and Cutting Your Costs for Marketplace Health Insurance.)
5. Non-Marketplace Health Insurance
If you don’t like the marketplace options and don’t qualify for health insurance tax credits based on your income and family size, you might consider a non-marketplace plan. You’ll be entitled to the same minimum level of healthcare that you would be with a marketplace plan and you’ll have the minimum essential coverage you need to avoid tax penalties. But you’ll need to sign up for these plans during open enrollment. Outside of open enrollment, you can only get a short-term plan, which provides you with health insurance but doesn’t let you avoid the tax penalties. (See Do You Need Short-Term Health Insurance?)
Non-marketplace plans don’t cost any more than equivalent marketplace plans, but you might find options that aren’t available in the marketplace, such as plans with broader coverage. You can buy a non-marketplace plan directly from an insurance company, through the marketplace or through an insurance agent or broker.
6. Going on Medicare
If you’re 65 or older, you may be able to rely on Medicare for your health insurance coverage. Your first chance to sign up for Medicare is called the initial enrollment period. According to Medicare.gov, this period “starts 3 months before your 65th birthday, includes the month you turn 65, and ends 3 months after the month you turn 65.” So if you were born after February 1, 1953, you could enroll in Medicare from November 1, 2017, through May 31, 2018.
The premiums for Medicare Part B, which only covers medical services such as doctor visits, surgeries and lab work, are $134 to $428.60 per month in 2017 depending on your income from two years ago (this means that a period of unemployment now won't help you with current Medicare rates, though it may in the future). You’ll also need part A for hospital coverage and Part D if you want prescription drug coverage. You may want a Medigap plan to cover things that Medicare doesn’t. Medicare Advantage plans (also called Part C) provided by third-party insurers are another option. Use the eligibility calculator at Medicare.gov to see if and when you can enroll in Medicare. (Learn more in What Does Medicare Cover?)
7. Qualifying for Medicaid
If your income is low enough and you’re younger than 65, you may qualify for Medicaid. If your income is too high to qualify for Medicaid, your children up to age 19 may still qualify for the Children’s Health Insurance Program (CHIP). You can find out if you qualify for Medicaid at HealthCare.gov or your state Medicaid office; see InsureKidsNow.gov for more information on CHIP. You can enroll in these programs at any time – there are no open enrollment or special enrollment periods. Depending on your state’s laws, you might pay a small copayment for some services.
Other Ways to Pay for Healthcare While Unemployed
If you have a health savings account (HSA) that you were planning to use during your retirement (see How to Use Your HSA for Retirement), now might be a good time to rely on some of those funds. (To learn more about your options, read How High Deductible Health Plans Work and How and When to Use Your HSA Funds.)
Long-Term Disability Insurance
Finally, a few employers will continue to offer long-term disability insurance to laid-off employees, so you’ll want to consider securing an individual policy. (Learn more about disability insurance in How to Insure Your Salary.)
In the next chapter, we’ll examine your life insurance needs and options.How Much Should You Pay in Life Insurance?