I Lost My Job -- What Should I Do About Health Insurance?

Fran
Fran Majidi
July 30, 2019

You may be in jeopardy of losing your health insurance if you get laid off, fired or if you fall below the minimum threshold for the hours you work per week. If you had a job-based insurance plan, you may be offered Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage options by your employer. Comparing rates, you may find that buying a health plan through the marketplace is more affordable. Furthermore, you may even find that a private health insurance provider can provide better rates and coverage. Your three options -- COBRA, the Health Insurance Marketplace and private healthcare insurance plans -- are detailed below.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

COBRA coverage allows you to keep your coverage in tact. The monthly premium will cost more than the amount deducted from your paychecks because your employer will no longer be paying their share of cost for coverage. You can also add a spouse and dependent children to your COBRA coverage. For some people, coverage through COBRA is less expensive than buying an individual or family health insurance plan.

If you have not signed up for COBRA because you didn’t know about it or didn’t understand your options, you may still be eligible for coverage. To be eligible you must be enrolled in the company’s group health insurance plan on the day before the qualifying event that caused you to lose your benefits (termination, resignation, loss of hours, etc.). If you had an employer with 20 or more employees who worked full time, they have to offer you COBRA coverage. Federal employees are offered a similar program as COBRA but the law is slightly different. There are also mini-COBRA plans for employers who have fewer than 20 employees.

Whatever you do, keep in mind that there is an enrollment deadline with COBRA so gather your information and act fast if you find this is the best option for you.

In order to be eligible for enrolling in COBRA, you must have a qualifying event that caused you to lose your health insurance from your employer, whether it’s loss of hours or the loss of the job. You can also get COBRA if you quit your job. Your spouse is also qualified for coverage through COBRA if they were on your healthcare plan.

Spouses and COBRA and Medicare

Your spouse is entitled to COBRA if you qualify. If you’re turning 65 and are planning on signing up for Medicare, your spouse will most likely qualify for COBRA if he/she was on your employer’s health care plan. In the event of a divorce or legal separation, the spouse of the covered employee may be eligible for COBRA. They would also be eligible in the event of the covered person’s death.

Is COBRA Temporary Coverage?

Yes, COBRA coverage usually extends from 18 to 36 months. If any of the beneficiaries is disabled, you may be able to extend the typical 18-month period. Also, you may be able to extend benefits if a second qualifying event occurs, including the death of the covered employee, a legal separation of a covered employee and spouse, the covered employee becomes entitled to Medicare or the child loses dependent status.

How Much Does Cobra Cost?

Your current employer probably pays a large percentage of your insurance at a group rate. Usually, the employer pays about 75% to 80% while you only pay about 25% to 20% through deductions on your paycheck. When you elect Cobra you will be paying 100% of your insurance cost with a possible percentage or two added on for administrative fees. Note that you’re not paying more than the original cost of the health plan, you’re simply paying the entire amount so it will feel more expensive.

COBRA Coverage Termination

COBRA may end prematurely if you do not pay your monthly premiums on time; if the employer no longer offers a group health plan for employees; if you gain coverage from another employer’s health plan; if you become eligible for Medicare; if you engage in misconduct like fraud.

Savings and Tax Credits

If you choose COBRA coverage, you can change your plan during the employer’s annual enrollment period..

Keep in mind that COBRA payments and other health-related costs are tax deductible if they are more than 7.5% of the income annually. If you have COBRA, you may qualify for a refundable tax credit called the Health Coverage Tax Credit (HCTC), which may pay up to 72.5% of premiums

You can also use your Health Savings Account (HSA) if you have one, to pay for COBRA premiums.

How Do I Sign Up for COBRA?

You may want to speak with your employer’s HR department or contact the health insurer you had as an employee. Speak with them directly to see if you qualify for COBRA coverage.

What is a Health Insurance Marketplace and How do I Buy a Health Plan?

This is where you can shop for affordable health insurance plans. If you are low income, you are eligible for a plan subsidized by the federal government. These are the opposite of private insurance companies.

Whether you quit your job, got fired or laid off, you can buy a marketplace health plan, even outside of the open enrollment period. Unlike what many people assume, sometimes buying health insurance through the marketplace is cheaper than electing COBRA coverage so it’s important to compare prices before you make a purchase decision.

To qualify for health insurance through the marketplace, you will need to provide proof that you’ve lost your insurance from your job. How much you save will be based on your income. However, you won’t be eligible for any savings if you had the option of accepting your spouse’s healthcare coverage and denied it.

Note that if you elect a marketplace plan, it will go into effect the first day of the month after your job-based insurance becomes inactive. If you have a waiting period at your job before health care benefits kick in, you may be able to buy a marketplace plan for coverage until your new job’s health insurance benefits kick in.

The best way to determine if you are eligible for the Affordable Care Act subsidies/discounts, would be to visit https://www.healthcare.gov/ and apply. Some states do not have a marketplace but can use the federal government’s health insurance marketplace.

Is There a Private Marketplace for Health Insurance?

There’s no specific marketplace for private health insurance companies. However, like, the ACA marketplace, private plans meet all the health care laws, including covering pre-existing conditions, providing free preventive care and not capping annual benefits.

There’s no one marketplace to buy private marketplace insurance. However, an agent can help you. Let SmartFinancial compare health insurance quotes for you to help you find the right insurance agent. All you do is fill out one simple form to get several free insurance quotes. Remember: you will not be turned away for having a pre-existing condition, so get started by entering your zip code!

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