Health Insurance Options If You’re Laid Off
It’s never smart to go without coverage; risks are especially high now
Compounding the financial stress of losing income when you’re laid off is the fact that your enrollment in your workplace health insurance plan will either end or require you to pay a whole lot more to stay on it.
To state the obvious, going without health insurance is never advised, but in the midst of a global pandemic it is especially unwise.
If laid off, you have two options: In some instances, you may have the right to stay on your old employer’s plan for up to 18 months, but the entire cost will be on your back, as your employer will likely no longer pay any portion of your premium. This is COBRA. (You may also be eligible for COBRA if your hours are reduced so much that you’re no longer eligible for the insurance offered to full-time employees.)
The other option: Buy a policy through the federal Affordable Care Act (ACA) marketplace. An ACA plan may be more affordable; if your household income has dropped, you may find that you qualify for subsidies.
Here’s what you need to know about both options.
COBRA. By federal law, COBRA allows you to stay on the group insurance plan if in the last calendar year the company had at least 20 full-time employees for at least half of the year. If you are eligible for COBRA coverage, you generally can stay on the plan for up to 18 months.
If your company had fewer than 20 full-time employees, you may still be covered by federal COBRA, based on how many part-time employees the company had. And if you aren’t eligible for extended coverage federal COBRA, you may be eligible under your state’s COBRA law. For instance, California’s COBRA law entitles employees laid off from companies with two to 19 employees to keep their coverage for up to 36 months. (California workers laid off from bigger companies can also get an additional 18 months of coverage after exhausting 18 months of federal COBRA.)
COBRA comes at a cost. Most employers pay a big chunk of the monthly premium for their workers. According to the Kaiser Family Foundation, in 2019 employers, on average, paid more than 80% of the premium for individual coverage, and 70% for employees with family coverage. That employer subsidy ends when you’re laid off.
If you want to stay in that group plan, you will typically be required to pay 100% of the premium: nearly $7,200 for an individual and around $20,600 for family coverage last year, on average, according to Kaiser.
If you are covered by COBRA, you have up to 60 days from the date of the layoff (or when you receive notice of the COBRA option) to enroll.
Purchasing an ACA plan. As long as you have a modest expected income (100% or 138% of the federal poverty level depending on your state) you are eligible to buy insurance through the ACA marketplace for the current year. You can do this online. Some states have their own website. Others use the federal online marketplace. Start at Healthcare.gov.
You will be approved for coverage regardless of any pre-existing conditions. This is a centerpiece of Obamacare.
If your household is dealing with reduced income, it raises the likelihood that you may qualify for help paying your monthly ACA premium. Your household modified adjusted gross income can be no more than four times the annual poverty rate, based on the size of your household. For one person, the 2020 cutoff is $51,400 in the continental U.S. (It’s higher in Alaska and Hawaii). For a four-person household, the income cutoff to be eligible for a subsidy is $104,800. Subsidies are larger for lower income households. More on income requirements here: https://www.healthcare.gov/income-and-household-information/income/
The nonprofit (and nonpartisan) Kaiser Family Foundation has a free online calculator that will give you a fast estimate of whether you qualify for ACA subsidies: https://www.kff.org/interactive/subsidy-calculator/
There are a variety of coverage levels for ACA plans. Bronze typically carries the lowest premium, but it also has a higher deductible. Silver plans have a higher premium cost but lower deductibles. Gold covers the most, but at a higher premium. Whichever website you are directed to for your state’s ACA plans, you can do side-by side comparisons.
Some plans are PPOs, others HMOs and you also likely have the option of choosing a high-deductible health plan (HDHP).
An HDHP health plan can be tempting. The premium is typically lower. But be careful; this only makes sense if you have the savings to cover your potential annual deductible, and you can also handle the maximum annual out-of-pocket costs.
Specific doctors you want to continue to work with? Contact that practice and confirm they accept the plan you’re looking at. Do not rely on any online data from the insurance website listing doctors in the network. They are notoriously unreliable. If a doctor does not accept a plan, ask for referrals and check with those doctors. Ultimately, you need to decide if you’re comfortable moving to a new doctor or not.
If you have continued to carry an adult child on your workplace plan, being laid off requires a family rethink. Though the law requires that you be allowed to carry a child on your workplace or ACA plan until the child turns 26, it’s time to have them stand on their own financial feet. If they are working, they will be able to qualify for ACA coverage (and at a lower premium than you, given how young they are). It’s also likely they will qualify for subsidies.