Since American health insurance is often based around our jobs, job loss can be compounded with extra worries. When you lose your job, quit, or change jobs, there is often a gap between when the health insurance from your old job ends and any new coverage begins. It’s possible to go without insurance during this time, but that comes with a big risk. What if an expensive medical emergency happens in that time period?
COBRA is one solution to cover this gap—but be warned, it tends to be expensive. Another option is buying a marketplace plan. There are also private plans intended for gaps in insurance.
Buying a Marketplace Plan
When you lose your job-based insurance, you become eligible for marketplace coverage. It’s a special enrollment period, so you don’t have to wait for the next open enrollment period. Simply go on Healthcare.gov and search for a qualifying plan. The advantage of this option is that it is often more affordable than COBRA insurance.
Many people are eligible for premium tax credits or other savings on a marketplace plan. This depends on your income and the other options available to you. For instance, if you are offered insurance through your spouse’s job, and you don’t want to take it, you aren’t eligible for assistance in paying for a marketplace plan. You also aren’t eligible if your income during this year is too high—so even though you have lost your income, the fact that you earned it until this moment may disqualify you. But most people, even when employed, do qualify for at least some discounts, so it’s worth applying to find out. Eight out of ten individuals on marketplace plans pay under $100 a month.
One issue with buying a marketplace plan is that it will not start until the first of the month after the month in which your job-based coverage ended. So if you lose your old coverage on the tenth of May, you won’t get covered again until the first of June. That leaves you with twenty days with no coverage at all. But you can stay on that marketplace plan as long as you need to.
COBRA Insurance
Under COBRA (the Consolidated Omnibus Budget Reconciliation Act), you have the right to continue your old coverage after you’ve lost your job. You will simply have to pay the entirety of the cost, instead of paying a share while your employer paid the rest. You will also have to pay a 2% administrative fee. Depending on how much your old employer contributed to your premiums, this may be a large increase in what you were paying before. And unlike with a marketplace plan, you won’t receive any assistance in paying it. Costs for an individual under COBRA range from $400 to $700 a month. If you have a family to cover, of course, that will cost more.
You can stay on your old insurance through COBRA for up to eighteen months. If you haven’t found a job that offers health insurance by then, you will have to find another plan anyway. But if you are switching jobs and only waiting to become eligible for coverage at the new job, COBRA coverage might make sense. Unlike with a marketplace plan, there’s no gap in health insurance coverage between jobs.
If you select COBRA insurance, your employer or plan administrator should be able to explain how to apply. Coverage will simply continue as before, with no gap.
Short-Term Private Insurance
Short-term private insurance is gap coverage which doesn’t meet Obamacare standards, but which comes with a correspondingly lower cost. These plans can cost up to 50% less than marketplace plans. But they mainly exist to cover you in an emergency—preventive care and care for pre-existing conditions are not generally covered. You may or may not have maternity or prescription drug coverage.
Plans last for a short time period, up to 90 days in some states and up to a year in others. As of 2019, you will not pay a tax penalty for not having a qualifying insurance plan.
This coverage can be good if you have a limited budget and no ongoing health issues you expect to need care for during the time period. It will cover catastrophes; you’ll be on your own for most other things.
Talk to Your Advisor
Job transition is a great time to sit down with a financial advisor and work out the details of your situation. What should your budget look like? What health insurance option will make the most sense? To find the right advisor for you, contact us today. We can match you with someone experienced in your particular needs.
