Does Health Insurance Expire Immediately After Quitting a Job?

secure Editorial Standards

SmartFinancial Offers Unbiased, Fact-based Information. Our fact-checked articles are intended to educate insurance shoppers so they can make the right buying decisions. Learn More

Your health insurance coverage will usually expire at the end of the month when you quit your job or after your last day of work. If the company is subject to COBRA (Consolidated Omnibus Budget Reconciliation Act), you may elect to extend your coverage up to 36 months after leaving a job. Learn what happens to your group health coverage if you quit your job or if you’re laid off plus SmartFinancial’s recommendations for finding a new health insurance policy.

When Does Health Insurance Expire After Leaving a Job?

Your health insurance coverage will usually expire at the end of the month when you leave the company or at the end of your last day worked. However, there are some exceptions to this rule. For example, if you are covered under a group health plan through your employer, you may be eligible for continuation of coverage under COBRA.

COBRA is a federal law that allows eligible employees and their dependents to continue their health insurance coverage for a certain period of time after they leave the company.

The coverage extension under COBRA can extend to 18 to 36 months after your employment. However, you are responsible for paying the entire premium yourself plus an additional 2% for administrative costs — in a group health plan, your employer covers a portion of these costs.

Another option is to purchase an individual health insurance plan on your own, either through your state’s healthcare marketplace or directly from an insurance provider. Leaving your job may qualify you for a special enrollment period, allowing individuals to buy a new ACA health plan outside open enrollment (runs from November 1 to January 15 in most states).

What Happens To Health Insurance if You’re Laid Off?

Your health coverage status when you’re laid off functions similarly to when you quit your job — usually ending either at the end of the month you’re laid off or the end of the last day you worked. Coverage extensions under COBRA for qualified policyholders will still apply, extending coverage for at least 18 months for qualified individuals.

What Health Insurance Options Do You Have After You Leave Your Job?

When an employee leaves their job, they have a few options for health insurance, including extending coverage under COBRA or buying a new plan on the ACA marketplace.

health insurance options after leaving a job

COBRA

COBRA allows employees to continue their employer-provided health insurance, potentially for up to 36 months after leaving their job but they will have to pay the full cost of the coverage themselves. This option is generally only available when companies employ at least 20 employees on more than half of their regular business days during the prior calendar year.

If an employee is eligible for COBRA, they have 60 days from the date of their job loss or the date their health coverage would have ended to enroll in coverage. If you miss the deadline, you will no longer be eligible for COBRA coverage.

Additionally, COBRA coverage may be terminated early if you become eligible for another group health plan, such as through a new employer or a spouse's employer.

Individual Health Insurance

Unemployed individuals can purchase individual health insurance plans from health insurance providers directly, usually at lower rates than ACA health plans. However, purchasing a non-ACA healthcare plan can come with drawbacks. Essential health benefits like hospitalization for surgeries, emergency services and prescription drugs, are not always covered.

For example, short-term health insurance is usually less expensive than traditional health insurance but typically covers fewer services. This health plan may be good for temporary coverage while the individual is waiting for coverage via their new employer to start.

ACA Marketplace/Exchange

An individual can enroll in health insurance plans through the government-run marketplace/exchange, also known as the Affordable Care Act (ACA) marketplace. These plans may offer subsidies to help lower the cost of coverage for those who qualify based on their income.

Fortunately, those recently unemployed may not have to wait until open enrollment to purchase an ACA health plan. Individuals who lose employer-based coverage may qualify for a special enrollment period, which allows them to enroll in a health plan outside the open enrollment period.

Medicaid

If you have lost your job and are unlikely to find employment soon, you may qualify for Medicaid, a joint federal and state program for low-income individuals and families. Eligibility criteria and other rules vary between states.

Spouse’s or Parent’s Healthcare Plan

When your coverage expires, you might be allowed to join your spouse's or partner's or parent’s health insurance plan. If your partner is covered by health insurance through their job, you may be required to wait until annual open enrollment to get added. If it is an ACA health plan you intend to join, then you may qualify for a special enrollment period and consult an agent with the health insurance company.

Shopping for Health Insurance After Quitting Your Job?

Are There Health Insurance Grace Periods After Leaving a Job?

Outside of complying with COBRA guidelines, there are generally no legal requirements for a company to extend health insurance coverage beyond what’s specified in your employment/benefits contract.

Fortunately, a penalty for going through the year without health insurance no longer exists at the federal level. However, a penalty may still apply at the state level — in Massachusetts, New Jersey and California, to name a few. Depending on how long you go without coverage, the penalty can range from $276 to $850 and up.

For example, in California, a 29-year-old individual may not pay a penalty tax for being uninsured for up to three months. However, the fine will start at $451 for the fourth month.

Where Can I Get Health Insurance if I’m Unemployed?

Unemployed people have various health insurance solutions to consider:

  • Continue your employer coverage via COBRA
  • Government-funded program, such as Medicaid (for low-income families) or Medicare (for citizens ages 65 and up)
  • Buy an ACA health plan on the ACA marketplace
  • Buy an individual health insurance plan directly through the insurance company

FAQs

What happens to my benefits if I leave my job?

Your health benefits will either end on your last day of employment or the end of the month you quit your job. If you have a 401(k) plan, you may need to have it rolled over into your employer’s plan (if available) or an individual retirement account (IRA) or cash it out.

Does health insurance end the day you resign?

Your health insurance after quitting a job will usually end on the last day you worked or the last day of the month you resigned. You may be able to continue employer-based coverage for up to 36 months by signing up through COBRA.

Can I get COBRA insurance if I quit my job?

You may qualify for COBRA coverage if you were a member of your employer's health insurance program when you were employed and if the program is still in operation for active employees.

Key Takeaways

  • Your health insurance coverage will usually expire at the end of the month when you quit your job or after your last day of work.
  • Health insurance coverage can last up to 36 months after an individual leaves their job by electing to continue coverage through COBRA (Consolidated Omnibus Budget Reconciliation Act).
  • Options for buying health insurance after leaving a job include short-term health plans, joining a spouse’s health insurance policy or buying a new plan on the ACA marketplace.

Don’t go without coverage even if you don’t have a job. Enter your zip code below or call 855.214.2291 to compare multiple companies and receive free health insurance quotes in minutes.

Source:

Get a Free Health Insurance Quote Online Now.