Losing your job is upsetting — especially since your employer-sponsored health insurance plan ends on the last day of your employment. COBRA and Obamacare plans offer alternative health insurance for the unemployed. Here’s what you need to know about both.
Keep Your Coverage With COBRA
Passed by Congress in 1985, the Consolidated Omnibus Budget Reconciliation Act (COBRA) allows people who lose their employer healthcare coverage to stay on their former employer’s group health insurance plan for up to 18 months following the end of their employment. As an alternative coverage option, COBRA also permits spouses of former employees — even if the couple divorces — to retain coverage for up to 36 months.
COBRA is a great option for individuals who have already invested a significant amount of money towards their yearly plan deductible and it provides a measure of security during periods of unemployment. COBRA coverage picks up right where the employer policy left off. For example, if you have a $5,000 deductible and have already fulfilled $5,125 in claims toward your deductible, your out-of-pocket costs for any additional medical services for the rest of the year will be greatly reduced, as your health insurance company will most likely pick up much of the tab.
COBRA Is Expensive
Once you decide you would like to continue with your former health insurance plan through COBRA and complete the appropriate paperwork, the healthcare policy is reinstated. It does take several weeks for your policy to be re-activated, so any medical services that are needed during the gap when your policy was terminated and then re-instated must be paid out of your own pocket. You can, however, file a claim for reimbursement once your health insurance plan is reactivated. The sting? Your former employer will no longer contribute to your healthcare plan costs, so you must pay 100 percent of your monthly premium cost for coverage. Because of this, COBRA can be an expensive route to take.
Obamacare More Affordable
If you have not invested money toward your yearly deductible, or were unhappy with your former employer’s health insurance plan, forgoing COBRA coverage in favor of an Obamacare or Affordable Care Act plan may be the more affordable alternative.
Since you have lost health insurance coverage from your employer, it is considered a “qualifying life event,” meaning that your special circumstance allows you to apply for health insurance outside of the regular open enrollment period. You have 60 days from your last day of employment to enroll in a Health Insurance Marketplace plan. You may also qualify for a premium tax credit or subsidy to help pay for your health insurance costs through your state exchange or on the federal marketplace.
Coronavirus Special Enrollment Period
If you lost your job and health coverage, you may be able to purchase new coverage. Several states, including California, New York or Washington, extended or re-opened health insurance enrollment due to the coronavirus pandemic. Some restrictions apply so check with your state’s health department or exchange. The final day in the Special Enrollment Period varies from April to June.
- California: June 30
- Colorado: April 3
- Connecticut: April 2
- Maryland: April 15
- Massachusetts: April 25
- Nevada: April 15
- New York: April 15
- Rhode Island: April 15
- Washington: April 8
Shopping For a Plan
If you have never shopped for a health insurance plan on your own, there are several things to consider before buying a healthcare plan. Most individuals have many plans to choose from; figuring out the best option can be stressful. Here are the top three things to review before you decide on a plan.
Understand what your out-of-pocket expenses will be
How much do you spend on medical services every year? Are you a light user of healthcare, or do you see a physician several times a year? Do you ever go to the ER or hospital? Add up your medical expenses from the previous year. This will give you a good baseline to determine your deductible.
Don’t forget prescription drugs.
Prescription drugs are often subject to a separate deductible. If you take several medications, make sure you are comfortable with the deductible amount – and add it to your out-of-pocket expense list in case you forgot.
Verify that the provider network suits your needs.
If you love your doctor or see multiple specialists, you want to make sure all of them are in-network. Networks vary by heath insurance plan, so it’s important to verify with your health insurance company of choice that the plan network will give you access to your doctor and local urgent care facilities and hospitals.
Once you have a good understanding of these three considerations, you can begin shopping for a plan. If you are healthy and only use preventive services, you might be able to save costs and apply for a low cost, high deductible plan. Just make sure you have $5,000-$12,000 in the bank that can cover your deductible should an accident or critical illness arise unexpectedly. If you use medical services regularly, you might want to consider a higher cost, lower deductible plan. It can be less expensive to spend a little more each month for a healthcare plan if you know you will be using care regularly.
Your math exercise from earlier will help you make this determination to protect your wallet and find the right health insurance plan. Health insurance for the unemployed is available — it’s just a matter of determining what you can afford for the level of coverage you desire.