In this article:
- Choose COBRA Coverage
- Get on Your Spouse’s, Domestic Partner’s or Parent’s Health Insurance
- Investigate Marketplace Health Insurance
- Find Out if You’re Eligible for Medicaid
- What About Private Health Insurance?
- Should You Ever Go Without Health Insurance?
- Choosing the Right Health Insurance When You’re Unemployed
Losing your job is bad enough without losing your health insurance, too. Unfortunately, that's what happens every year to millions of Americans whose health care coverage is provided by their employers. There are many options for getting health insurance when you're unemployed, including COBRA, the Affordable Care Act's Health Insurance Marketplace, joining a spouse's plan or even purchasing individual coverage. To ensure you don't miss your chance to enroll, however, you need to act fast.
Choose COBRA Coverage
Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), companies with 20 or more employees must offer former employees the option to keep their employer-provided health insurance for 18 months after terminating employment. In addition, many states have their own similar laws that apply to smaller employers. Within 14 days of losing or quitting your job, your employer must provide you with written notice of your COBRA rights explaining how COBRA works and how to decline it or elect to continue your health insurance.
Once you receive this notice, you generally have 60 days to accept COBRA coverage and 45 days after that to pay your first premium (the federal government has temporarily extended this time frame due to COVID-19). Once you pay your premium, your coverage takes effect retroactive to the date you lost your employer-provided health insurance policy.
The big advantage of COBRA coverage is its ease and continuity. You don't have to do a bunch of research and comparisons; you get to keep your doctors and enjoy all the same benefits. However, be ready for sticker shock, because your former employer may require you to pay the entire premium yourself. They may have totally or partly covered your premium while you were employed, but that park ended when you were separated from the company. Try negotiating with your former employer to have them continue paying their portion as part of your severance package. If your employer doesn't feel like footing your bill, however, they can charge you up to 102% of the premium costs (the 2% is an administrative fee). In 2019, the annual premium for an employer-sponsored family health insurance averaged $20,576—a steep bill at the best of times, but especially when you're unemployed.
Taking advantage of COBRA while you're unemployed might make sense if:
- Your employer is paying part of the premiums.
- You've already paid a great deal toward your annual deductible and don't want to start over with a new health plan.
- You want to stay with your current plan and medical providers because you're pregnant, undergoing medical treatment or are in a similar long-term situation.
Choosing COBRA coverage can limit your ability to buy a plan in the Health Insurance Marketplace later, so investigate Marketplace options before you make your decision. (More on the Marketplace below.)
For more details about COBRA, see The Department of Labor's publication An Employee's Guide to Health Benefits Under COBRA.
Get on Your Spouse's, Domestic Partner's or Parent's Health Insurance
If your spouse or domestic partner's job offers health insurance coverage to employees' spouses and dependents, getting added to their plan can be a simple solution. (If you're under age 26, you may be able to enroll in a parent's employer-sponsored health insurance.)
A spouse's or partner's health insurance is a known quantity: Your spouse is already familiar with the benefits, costs and deductibles, and knows the level of coverage, which can help in assessing its value. On the other hand, if their coverage doesn't fit your needs, you may want to explore other options.
Normally, you can enroll in health insurance only once a year, during "open enrollment," which takes place in the fall. However, leaving your job is considered a qualifying event, and gives you 30 days to sign up for your spouse's or partner's plan no matter the time of year. You'll need to complete an application and may need to provide proof that you are losing your health insurance.
Investigate Marketplace Health Insurance
Health insurance plans that meet Affordable Care Act (ACA) requirements are sold through the Health Insurance Marketplace at HealthCare.gov; some states have their own marketplaces. It's worth investigating Marketplace coverage before making any insurance decisions, because you may qualify for tax credits that will pay part or even all of your premiums.
All Marketplace plans must cover preexisting conditions and 10 essential health benefits, including prescription drugs, maternity care and mental health care. Plans come in four "metal" levels: Bronze, Silver, Gold and Platinum. Bronze plans have the lowest premiums, but they cover only about 60% of your health care costs and have high deductibles, so you'll pay more out of pocket if you need care. Platinum plans have high premiums but low deductibles and cover about 90% of your health care costs. Silver and Gold plans fall somewhere in the middle. In addition to tax credits, you might also qualify for "cost-sharing reductions" that lower your out-of-pocket costs for deductibles, copayments and coinsurance; if so, you must buy a Silver plan to take advantage of these reductions.
Normally, you can only purchase Marketplace plans during open enrollment. However, when you lose job-based health insurance, you qualify for a Special Enrollment period and have 60 days to enroll in a Marketplace health plan, regardless of the time of year.
If you've elected COBRA, however, you qualify for Special Enrollment in a marketplace plan only if your COBRA period is ending or your employer stops contributing to your COBRA premiums. Otherwise, you'll have to wait until the Marketplace open enrollment period to drop COBRA coverage and sign up for a Marketplace plan.
You can "window shop" on the Marketplace anonymously before applying for a plan. Just visit HealthCare.gov, put in your ZIP code, and estimate your family income for the year in which you want coverage. You'll be shown a variety of available plans from private insurance companies, including estimated prices and subsidies you may qualify for.
Once you see a plan you like, apply for coverage through the Marketplace. You can do this yourself or get help by phone or in person from a trained assister. You can also use a local insurance broker who sells Marketplace plans. This can be a good idea because unlike other assisters, brokers can legally recommend specific plans and suggest ways you can maximize savings and subsidies while getting the best coverage.
Once approved, you'll make premium payments directly to your insurance company. Keep in mind that Marketplace coverage doesn't start when your premiums start; make sure you know when your coverage begins.
Find Out if You're Eligible for Medicaid
Medicaid is a federal program that provides health insurance for people with low incomes. It may be known by different names in different states, and eligibility can vary from state to state. When you apply for Marketplace health insurance, your eligibility for Medicaid is automatically assessed. If you are determined to be eligible, the appropriate state agency will contact you about applying.
If you have children aged 19 and younger, and your income is too high to qualify for Medicaid, your children might be eligible for health insurance through the Children's Health Insurance Program (CHIP). When you apply for Medicaid, you'll be notified if your children qualify for CHIP.
You can enroll in both Medicaid and CHIP year-round—no need to wait for open enrollment.
What About Private Health Insurance?
You can buy health insurance outside of the Marketplace several ways:
- Directly through a health insurance company.
- From an insurance agent representing one insurer.
- From an insurance broker representing many different insurance companies.
Some individual insurance plans sold outside the Marketplace are ACA-compliant, but many are not, so it's important to read the fine print carefully when considering such a policy.
Short-term health insurance plans are a special type of individual health insurance. These plans last one year and can sometimes be renewed for up to 36 months. Unlike Marketplace policies, however, short-term health insurance policies aren't required to meet ACA guidelines. As a result, these plans typically offer more limited coverage than Marketplace plans; for example, they may not cover prescription drugs, pregnancy care or mental health care. They often have higher deductibles and may place an annual cap on the dollar amount of benefits you can receive.
Short-term plans aren't required to cover preexisting conditions or even sell insurance to people who have them. If you do get a short-term plan and you have a preexisting condition, you'll likely pay more in premiums than if you didn't.
Comparing policies available in the individual insurance market can be confusing. Working with an insurance broker can help you navigate your options.
Should You Ever Go Without Health Insurance?
The federal fine for not having health insurance is no longer in place, although some states have their own penalties. (In California, for instance, a family of four that goes uninsured for all of 2021 would face a penalty of at least $2,250.) Should you take the risk and make do without health insurance?
A fine will be the least you have to worry about if you break your arm, get appendicitis or have a heart attack and don't have health insurance. The average hospital admission in the U.S. cost over $24,680 in 2018, according to KFF.org; the average admission for surgery cost $47,345. Perhaps it's not surprising that medical costs are a leading cause of U.S. personal bankruptcies. Purchasing at least minimal coverage can help provide peace of mind, knowing that you're covered if a costly illness or accident occurs while you're in between jobs.
Choosing the Right Health Insurance When You're Unemployed
There's a lot to think about when looking for health insurance while unemployed. You'll need to consider your health care needs as well as your budget. In addition to premium costs, you should also assess deductibles, copayments and coinsurance, out-of-pocket maximums and any caps on coverage.
Once you've found the right health insurance plan, be sure to make your payments on time. Setting up automatic payments from your bank account or a credit card can help to ensure you don't miss a payment. Late payments may negatively affect your credit score and might even cost you the health insurance you worked so hard to get.