6 Health Insurance Options if You Lose a Job

Main takeaways

• You have multiple coverage options after losing a job, including COBRA, a spouse’s employer plan and ACA Marketplace policies

• COBRA lets you keep your old employer’s plan but usually costs more since the employer no longer subsidizes premiums.

• Short-term and non-Marketplace plans fill gaps but often provide less comprehensive coverage, making them better suited as temporary or lower-cost stopgaps.

The sudden absence of a paycheck following a job loss is a tough enough pill to swallow. Losing your health care coverage when you walk out the door makes things that much harder. 

Buying insurance on your own may seem like a tall order when you’re scrounging just to pay for groceries and rent. Still, having a plan that can defray the cost of planned or unplanned medical needs is absolutely vital. If you recently lost your job for any reason, here are the options you’ll want to consider: 

1. COBRA

Sometimes your best option is staying with your current employer plan, even if you’re no longer with the company. The Consolidated Omnibus Budget Reconciliation Act—better known as COBRA—requires employers to extend coverage to you and your dependents for a limited time after a job loss (voluntary or involuntary), a cut in your work schedule or a qualifying life event.

The law applies only to health plans offered by an employer averaging 20 or more employees throughout the prior calendar year. Those organizations have to provide 18 or 36 months of coverage to qualifying participants, depending on the type of life event they experience.

But here’s the rub: You’ll likely pay much more for premiums than you did as a full-time employee. That’s because, under COBRA, employers don’t have to supplement the cost of your coverage. Still, it doesn’t hurt to contact your benefits department and ask for pricing. If you really like your plan, or already reached your deductible for the year, you may decide the extra cost is worth it.

2. Your spouse’s workplace plan

The Health Insurance Portability and Accountability Act, or HIPAA, allows recently unemployed individuals to “special enroll” in a spouse’s group health care plan without having to wait for the next open enrollment period to roll around.

As with COBRA coverage, you won’t have to go through medical underwriting to qualify for coverage. But unlike COBRA coverage, your spouse’s employer may contribute to the cost of your premiums, which can dramatically lower your costs.

If you’re going to pursue coverage through a husband’s or wife’s workplace, however, make sure you do so in a timely manner. Under federal law, you have just 30 days to request special enrollment after losing your existing coverage.

3. Marketplace plans

Whether or not COBRA or other group coverage is an option, you’ll probably want to check out what’s available on the individual market. You’ll likely find the most robust coverage with plans compliant with the Affordable Care Act, or ACA.

Unlike other policies, ACA plans have to cover 10 “essential” health categories without lifetime or annual dollar limits. And, crucially, you can’t be denied coverage based on pre-existing conditions. And if you meet income requirements, you may qualify for a tax credit that can lower your monthly premium.

Consumers in most of the country can shop these plans on Healthcare.gov, although some states operate their own exchanges. You can also get help with enrollment over the phone by calling the Marketplace call center at (800) 318-2596. And if you’d rather get help in-person, you can browse certified brokers and agents in your area.

4. Non-marketplace plans

You can always shop for individual plans sold outside the Marketplace as well. These policies are available through insurance carrier websites, brokers and online insurance sites.

You aren’t guaranteed all of the same coverage categories mandated by an ACA-compliant plan, so you have to do some research in terms of what the policy does and doesn’t reimburse.

With a non-Marketplace plan, you could be denied coverage or face higher premiums if you have an existing health condition. But if you’re relatively healthy, you may find better pricing this way—especially if you don’t qualify for a tax credit through the exchange.

5. Short-term insurance

Short-term health insurance policies, available in most states, are intended to help when there’s a gap in your other coverage. Depending on the state you live in, carriers can sell short-term plans that last up to 364 days—with the possibility of renewals up to three years. But states such as California, New York, New Jersey, Rhode Island and Massachusetts have banned short-term plans outright. 

Coverage tends to be less robust than major medical plans. While some will help cover prescription drugs or office visits for a non-pre-existing condition, it’s better to think of short-term policies as a safety net in case of an emergency. 

However, they tend to be more affordable than major medical plans, and the application process is typically fairly quick. Most consumers get approved within 14 days, according to the online insurance marketplace eHealth.

6. Medicaid

Even if you don’t think of yourself as a “low-income” individual, you may find that you’re now eligible for affordable coverage through Medicaid. Roughly 40 states expanded eligibility with the ACA’s passage, which means those residents now qualify if their income is below 138 percent of the poverty level. 

The Medicaid program determines eligibility by adding income from all working adults in the household, plus any state unemployment benefits you receive. Because it uses current income when you apply, you may get in even if your past wages put you significantly above the threshold. 

The Marketplace makes it extra convenient to figure out if you meet program requirements by building Medicaid screening questions into the application process. If you’re not going on the exchange, however, you can call your state’s Medicaid office or visit its website directly. 

The upshot

Losing your job doesn’t have to mean losing out on health coverage. By comparing your options, you can find a plan that fits your budget and gives you vital protection until you obtain new employment.