Got laid off from work? Here’s what to know about your insurance options

If you were laid off, you probably have a lot on your mind. Maybe you’re stressed about how you’ll pay your bills or how fast you can find another job. You may also worry about what you’ll do if you or a family member gets sick while you’re unemployed. The good news? You have health insurance options, says Adria Gross, CEO and founder of MedWise Insurance Advocacy in Monroe, New York.

You have three main options: You can enroll in a plan through the Affordable Care Act (ACA) Marketplace, you can sign up for continuation of health coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), or you can opt for short-term medical insurance. Here’s a closer look. 

Option 1: Enroll in a marketplace plan

If you lose your job, one of the first things you’ll want to do is research ACA Marketplace plans. All plans offered in the marketplace comply with the Affordable Care Act. That means they meet the standards established by the federal government. The plans will cover essential health benefits and preexisting conditions without annual or lifetime benefit caps. You may also receive income-based subsidies to make coverage and care more affordable.1

“Losing your job qualifies you for a special enrollment period so that you can get coverage for the rest of the year,” explains Gross. You just need to apply for marketplace coverage within 60 days of losing your employment. Your coverage can start the first day of the month after you lose your job-based coverage. (Your current health insurance, through your employer, will be in effect until the end of the month.)

What are the subsidies that come with Marketplace plans?

The advantage to a Marketplace plan is that you may qualify for savings on your monthly premiums, which are known as premium tax credits, says Gross. The amount of your tax credit depends on your estimated household income for that year. You apply the tax credit to your monthly insurance premium payment, which is sent directly to your insurance carrier, so you end up paying less each month.2

If you qualify for premium tax credits, you may also qualify for cost-sharing reductions. This means a lower deductible, lower copayments or coinsurance, and a lower out-of-pocket maximum. The only catch is that you must pick a moderately priced plan to get these extra savings on out-of-pocket costs; they aren’t available with the lowest cost plan.

You may also need to prove that you lost health insurance through your job. When you apply for Marketplace coverage, it will tell you if you need to submit documents to confirm your loss of coverage.4

Marketplace plans are often more affordable, especially if you qualify for tax credits and cost sharing, says Gross. “But you’ll want to check that all your medical providers are still in network and confirm that all your prescription meds are covered under your new plan’s drug formulary so you don’t get hit with steep out-of-pocket costs,” says Gross. This is especially important if you have a chronic condition, where you see doctors frequently.

Option 2: Sign up for COBRA coverage

This is insurance under federal law that allows you to keep you, your spouse and your dependents on your former company’s group health plan when your job ends. It applies to employers that have health coverage for at least 20 employees. Some states also have their own mini-COBRA laws for companies with fewer than 20 employees.5

When you choose COBRA, you continue with the same health insurance plan you already have. You’ll be able to keep all your same doctors. And all your prescription medications should still be covered under your existing plan’s formulary. But you’ll pay 100% of the costs of the plan, including costs your employer previously paid. That includes monthly premiums and possibly an additional 2% administrative fee. COBRA coverage can last from 18 to 36 months, depending on the qualifying event.5

With COBRA, you can keep your current doctors. And if you’ve already met your deductible on your old job plan, “you’ll probably have fewer out-of-pocket costs,” explains Gross.

Option 3: Go with short-term medical insurance

This insurance plan can provide a temporary solution to help fill gaps in coverage until you can choose a long-term solution. Term lengths vary by state, but in some states you can apply for up to nearly 12 months of coverage.

The benefits of short-term medical insurance are:

  • You can get covered fast, as soon as the day after application.
  • You can choose your deductible amount from several options.
  • Drop coverage with no penalty if a more permanent health insurance option comes along.
  • You may be able to apply for another short term health insurance plan when the first one finishes, if needed.
  • Access an extensive network of health care professionals, with 1.5 million physicians and other health care professionals and approximately 7,000 hospitals and other facilities.

Unlike COBRA or marketplace plans, short-term insurance requires you to go through medical underwriting. That means the plans do not cover preexisting conditions, and you must answer a series of medical questions to apply for coverage. (If you’re covering spouses and dependents, all family members will need to meet medical requirements of the short-term plan.)

And while marketplace plans are required to cover 10 essential health benefits — including maternity and newborn care, mental health and substance abuse disorder services —short term insurance plans do not have coverage requirements, so plans vary in what they cover. There is only limited prescription coverage or preventative care with some plans, for instance, so check your plan details carefully.

You may save money by choosing short term health insurance, just be sure it’s the right choice for you. Given the above criteria, sometimes short-term insurance is a better option for someone who’s younger, in good health and doesn’t anticipate having to get frequent medical care.

The bottom line: If you’ve been laid off, you have options, and one of them will likely meet your current needs. And remember, when the next Open Enrollment Period comes around, you can always change. Plus, if you land a new job, you may have new options through your employer.

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