A pink slip can be a traumatic experience but losing your employer-provided health insurance is nothing short of devastating. Since the coronavirus pandemic erupted in early 2020, tens of millions of workers lost both a paycheck and health coverage, hitting them with a double whammy of financial hardship from COVID-19.
America is among very few advanced nations that relies on employers to provide health insurance. For those with steady jobs and solid plans, it’s a reasonable arrangement, but for the jobless it can be a crushing hardship. Medical costs have skyrocketed in recent decades and most people without insurance coverage aren’t prepared for even a minor medical emergency, let alone complete loss of coverage.
Before the pandemic, about 157 million Americans had coverage through an employer. The cost of insuring a family through employer-provided insurance hit $21,343 in 2020, according to the Kaiser Family Foundation. Workers only paid about a quarter of that in health insurance premiums with their companies covering the rest.
Since 2010, premiums have shot up 55%, making health care coverage increasingly unaffordable for middle-income families. Though insurance costs are high – especially if you don’t have an employer footing most of the bill – going without coverage is something few want to risk.
There are at least five options you can research to see if you’re qualified for one:
- Affordable Care Act (Obamacare)
- Medicaid or CHIP (Children’s Health Insurance Program)
- Short-Term Insurance Option
How to Get Health Insurance Without a Job
If you’re one of the newly unemployed, landing temporary health coverage should be a top priority since suffering a serious medical problem without insurance can be ruinous. All options require a crash course in how the health insurance system works. It’s very important that you move quickly as soon as you know you’ll need new coverage.
A stopwatch starts ticking the day your job ends. You’ll have 60 days to either temporarily extend your employer coverage under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) or find a new policy through the Affordable Care Act (also called Obamacare), which offers an assortment of insurance plans at various prices and coverage levels.
Even if you have health insurance from an employer or through a family member, it’s a good idea to know how the coverage works and where to look for a new plan if the policy is canceled. If you or an insuring family member leaves a job that provided coverage, you should immediately contact the insurance company to learn how long the coverage will last before you need to switch to another option.
If you expect to land another job that offers insurance in the near future, opting for COBRA coverage might be a good, but costly, alternative. If your former company has at least 20 full-time employees and you were covered under the plan for at least a day, you are eligible to continue your insurance for an extension of coverage within 60 days of leaving the job.
COBRA can save time, since you don’t need to look for a new, individual plan. But it can be expensive. The COBRA statute requires employers to offer insurance for 18 months after you quit, are terminated or are no longer eligible for employer coverage due to reduced hours. If the reason for the change in status is the employee’s death, divorce or legal separation, COBRA benefits last three years.
Employers usually subsidize health insurance, but that goes away under COBRA. If you leave your job, you probably will need to pay the full cost of your insurance, which likely will be much more than you had paid. For that reason, many former employees pass on COBRA and look for less costly alternatives.
Using the Affordable Care Act
The federal Affordable Care Act allows you to shop for health insurance through a public marketplace. Policies vary in cost and coverage, but all must include benefits such as vaccinations and annual physical exams.
If you want to switch to an ACA policy, you will have to make a decision within 60 days of leaving your job. The two-month window is called a special enrollment period. During that time, you can shop for a plan through the ACA website. Insurers can’t deny coverage if you have a pre-existing medical condition. If you fail to act within 60 days, you will have to wait for the annual ACA open enrollment period to gain coverage. The period lasts from the beginning of November to the middle of December.
Though losing employer-sponsored coverage is the most common reason to move to an ACA plan through a special enrollment period, other circumstances qualify special enrollment.
These are called qualifying life events and include:
- Loss of an individual or ACA marketplace policy because your current plan was discontinued
- Loss of a student healthcare plan
- You lose your coverage because you no longer live in a plan’s service area
- Your insurance coverage expires during the year, before the ACA open-enrollment period begins
- A decrease in household income that allows you to qualify for ACA coverage that was unavailable when you were earning more
Medicaid and Children’s Health Insurance Program (CHIP)
Medicaid and CHIP offer healthcare coverage based on applicants’ incomes. They are both publicly sponsored and subsidized, and unlike the ACA they allow qualified applicants to gain coverage at any time during the year.
Medicaid is open to anyone whose income falls beneath a threshold levels (usually 138% of federal poverty level), while CHIP is reserved for children. Both programs are administered through the states, so eligibility requirements vary. Both provide free and low-cost insurance. You can get more information about the programs and state requirements through the HealthCare.gov website.
Medicare, If You are Eligible
Medicare is federally subsidized insurance that covers tens of millions of Americans, most aged 65 and older. Though the program was designed primarily for retirees, it is open to others with certain disabilities.
Medicare coverage generally is much less expensive than comparable individual plans. For recent retirees who are over the threshold age, it is the best alternative to company-sponsored health insurance. Medicare coverage has numerous options. Some, like insurance-company administered Medicare Advantage plans, offer a wide range of extras, including vision, dental and fitness programs. Visit the Medicare.gov. website to learn if you qualify.
The Short-Term Insurance Option
If you lose your health insurance before the ACA open enrollment period and fail to lock in another policy within 60 days, you can apply for a short-term policy. These policies are usually inexpensive – often costly less than $100 a month – but they lack benefits guaranteed under policies that conform to ACA rules, like preventative care coverage.
Short-term policies are just what they sound like. Typically, they can’t extend beyond one calendar year. They are useful for covering against accidents or medical emergencies, but often have caps on how much they’ll pay during the life of the policy. They often come with high copayments and don’t cover pre-existing conditions. Only consider a short-term policy if you lack alternatives.
FAQs About Losing Health Insurance
How long do you have health insurance after leaving a job?
How long your health benefits remains active after leaving a job depends on your employer. Your employer may terminate your benefits on the day you leave your job, or let them continue through the end of the month. You do have the option to extend your health care coverage through COBRA within 60 days of losing your job, though you will be responsible for paying the full premium. In this case, coverage will last for 18 months after you quit, are terminated or are no longer eligible for employer coverage due to reduced hours. COBRA benefits last three years if the loss of health insurance resulted from an employee’s death, divorce or legal separation.
Can health insurance be canceled without notice?
An insurance company needs to give you written, timely notice and an explanation before it drops your policy. This applies to both individual and group policies. If you lose your policy, you are entitled to find an ACA policy within 60 days of cancelation, even if the cancelation took place outside the ACA open enrollment period.
Can I cancel my health insurance if I get a new job?
You are free to cancel health insurance at any time, though you will have to wait until the next ACA open enrollment period to enroll in an Obamacare policy. If your new employer offers affordable health insurance, you can enroll in the employer’s group plan after you’re hired.
Is there a penalty for canceling health insurance?
Though the ACA law originally required that everyone have health insurance coverage for at least nine months a year or face a tax penalty, Congress eliminated that requirement in 2019. Effectively, there is no longer a tax penalty for canceling or opting out of health insurance. Insurance companies can charge a penalty for canceling a coverage contract. You should review your policy or contact an insurance agent to find out if you face a penalty and how much it might be. In most cases, there is no penalty for canceling commercial health insurance coverage. If you cancel a Medicare policy, you will pay a penalty if you wish to re-enroll sometime in the future.
Max Fay has been writing about personal finance for Debt.org for the past five years. His expertise is in student loans, credit cards and mortgages. Max inherited a genetic predisposition to being tight with his money and free with financial advice. He was published in every major newspaper in Florida while working his way through Florida State University. He can be reached at [email protected].
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