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How to get health insurance if you're unemployed or changing jobs

You've lost your job and you're looking for health insurance coverage while you search for your next opportunity. Or maybe you have a new job, but your employer doesn't kick in health insurance immediately, which means you'll be uninsured for a while.

What do you do? There are multiple options depending on where you live, your income and your situation.

An important thing to remember about health insurance is that you'll get penalized at tax time if you're uninsured for three months in a row. The Affordable Care Act (ACA), also known as Obamacare, instituted the individual mandate, which requires nearly all Americans to have health insurance.

That will soon end. Congress voted to kill the individual mandate penalty starting in 2019. So, this is the final year in which you'll be required to have health insurance or pay a penalty.

The penalty for 2017 was $695 per person or 2.5 percent of household income, whichever is greater. You would pay that penalty at tax time.

Even without the individual mandate though, it's still wise to have health insurance.

 

When does your insurance end?

The first thing to find out is when your previous employer is ending your coverage. Some jobs will stop your coverage immediately, other employers will wait until the end of the month, while still others may give you more time, especially if you were part of a layoff.

Find out when your previous employer is going to stop coverage. Once you know that, you can begin to plan what to do next.

Also, if you're starting a new job, find out from the new employer when that coverage kicks in. You may find that you'll only be without insurance for days or a few weeks. In that case, you may decide to go without insurance temporarily.

What are your health insurance options?

Now, let's take a look at your options if you lose health insurance. You can choose one of these avenues: COBRA, individual insurance/ACA exchanges, short-term catastrophic plans, Medicaid or get covered under your spouse's health plan.

 

Go on your spouse's health plan

This might be the easiest option if it's available.

Losing your job would kick in a special enrollment period with your spouse's employer. Typically, you can't switch insurance unless it's during the open enrollment period. However, life events like losing your job, having a child and getting married, puts into place a special enrollment period in which you and your spouse can change or add insurance.

If you decide on this option, your spouse would need to speak to his or her employer about health insurance options, sign up for a policy and add you to the plan.

Pro: You get to stay in a group plan, which is usually less expensive than going with individual insurance or COBRA.

Con: The plan may not be as good as if you got an individual or nongroup plan.

 

COBRA

For many years, COBRA was one of the only viable options for Americans, who lost their jobs. The Consolidated Omnibus Budget Reconciliation Act of 1996 (COBRA) created a way for people to buy coverage under their employer-based group health plan. Employers with at least 20 employees must provide this option for people who lose their job.

The benefit of COBRA health insurance is that you get to keep the same insurance plan until you find a new job. The major drawback is it's quite expensive.

Pro: You get to keep your group coverage at least temporarily.

Con: It costs much more than your previous employer-based coverage.

 

Individual insurance and ACA exchanges

Individual health insurance was once only affordable for people who were young and in perfect health. Before the ACA, health insurers could impose individual health insurance premiums based on your health status and pre-existing conditions. This led to sky-high premiums for people who weren't in excellent health. An insurer could even deny coverage because of a preexisting condition.

The ACA changed that. Now, health insurers must accept you regardless of your health status and you won't have to pay exorbitantly higher premiums if you're not in terrific health.

You can get an individual, also called nongroup insurance, plan either as part of the ACA exchanges or off the exchanges.

The ACA divides plans by metal level. The level depends on the cost of premiums, how much cost the insurer will cover and how much the member will pay:

  • Bronze: Health plan pays 60% on average.
  • Silver: Health plan pays 70% on average.
  • Gold: Health plan pays 80% on average.
  • Platinum: Health plan pays 90% on average.

What this means is you will pay lower premiums, but more out-of-pocket costs if you choose a Bronze plan compared to the others. On the other hand, Platinum has the highest premiums, but the lowest out-of-pocket costs.

Individual plan premiums, both on and off the exchanges, have increased faster than employer-based plans over the past few years. Some major insurance companies have also pulled out of the exchanges because of the market's perceived instability.

Many members in these plans may not have noticed the premium increases though. That's because the ACA provides subsidies to insurers for lower-income people in those plans to offset high premiums.

Pro: Plans offer ACA protections, including the 10 essential health benefits, such as outpatient, maternity and prescription drugs.

Con: These plans can be expensive if you're not eligible for government subsidies.

 

Short-term catastrophic plans

Short-term catastrophic plans are a low-cost way to help bridge the gap between jobs.

Short-term plans are meant as a safety net to protect you against financial ruin if you get seriously ill. The coverage is limited and the plans have hefty out-of-pocket costs.

You pay low premiums, but catastrophic health plans reimburse less than 60% of the total cost of care, which means you will pay more for actual care if you need it.

These plans have high deductibles. Currently, people can enroll in the short-term plans for only three months. The Trump administration wants to expand that to as much as a year and allow members to renew plans. So, these plans may soon work like any other health insurance in that respect.

At this time, not everyone is eligible for a short-term plan. It's only available to people who are young or can't afford other coverage. There aren't many who have these types of plans. Kaiser Family Foundation estimates that only 110,000 people have a catastrophic plan now.

That may change in 2019 if the Trump administration follows through on its proposal to expand the plans and open them up to anyone, which could make these an attractive alternative to people who want a low-cost plan.

Pro: Low cost.

Con: High deductibles and out-of-pocket costs and at the moment, few people are even eligible for short-term catastrophic plans.

 

Medicaid

Depending on your income and where you live, you might be eligible for Medicaid. The ACA allowed states to expand Medicaid for lower-income and lower-middle-class people, in addition to people living in poverty. Medicaid expansion is the primary reason why millions of previously uninsured people now have health insurance since the ACA.

Through Medicaid expansion, nearly three dozen states allow their Medicaid programs to cover people whose salary is up to 400 percent of the federal poverty limit. That means you could be eligible for Medicaid in expansion states if you need insurance for yourself ($48,240) or a family of four ($98,400).

Pro: Low-cost option with consumer protections and low out-of-pocket costs.

Con: You have to meet income requirements and your doctor may not take Medicaid.

 

Shop around for health insurance

If you're out of work and need a health insurance plan, make sure to explore all of your options. If you're shopping for a health insurance provider, you can use Insure.com's list of the best health insurance companies to compare and find one that best suits your needs. You can also use the Health Insurance Advisor tool to identify what type of coverage you need.

Here are some steps to take:

  • Explore your spouse's employer's health insurance options.
  • Read through the COBRA information that your previous employer sends you and see whether that plan would make sense for your situation.
  • Go to your state's ACA marketplace, enter in your information and see how much those plans would cost you.
  • See if there are individual health insurance plans not part of the ACA exchanges that might work better for you.
  • Check if you're eligible for a short-term plan if that interests you (Note: You should be able to find this out by entering your information into the ACA marketplace website. If you're eligible, the marketplace will list it as an option.)
  • Figure out if you're eligible for Medicaid in your state.

Taking these steps will help put you on the path to get a health insurance plan that works for you. Being out of work can be stressful. However, finding a health plan that bridges your insurance gap until a new employer covers you will relieve some of your stress while you're out of work.

 

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