If you’re out of work, you still have some options for health insurance coverage. Here are 2 options.

Losing your job isn’t always easy. It may mean that you’ll have to go back out on the market and get new employment. It could also mean that you get a part-time or gig job in the interim or even start your own business.

The good news: If you had health insurance through your former employer, you won’t immediately lose it. In fact, you have various options for keeping or getting new health insurance benefits.

One option could be taking advantage of COBRA, or the Consolidated Omnibus Budget Reconciliation Act, a federal law that allows people and their families to stay on their employer-based insurance for a period of time. Another could be purchasing a short term medical insurance plan through an insurance company.

What’s the better option if you lose your job? Find out below.

COBRA can be expensive — especially if you lose your job. Find out why short term medical insurance could be a possible option.

What is COBRA?

COBRA is a law that allows you to keep your former company’s group health insurance plan, even when your job ends. If you have a family, it also allows the following people to stay on the plan:

• Your spouse
• Your ex-spouse
• Your dependents/children

Generally, COBRA applies to employees who work for employers that have health coverage for at least 20 employees. (Some states also have their own COBRA-style laws for companies with fewer than 20 employees.)

When you choose COBRA, you’re opting to continue with the same health insurance plan you already have. You’ll be able to keep your same doctors, and your prescription medications will likely still be covered under your existing plan’s drug list (formulary).

But here’s the catch: You’ll have to cover the insurance plan’s full costs, which include your monthly insurance bill (premium), plus possibly an additional 2% administrative fee. That may be a lot more expensive than what you were paying before on a monthly basis, because your former employer may have been covering a portion or percentage of that bill.
COBRA isn’t forever, either. You’ll likely be covered for 18 to 36 months after losing your job. That gives you more than a year to either find a new job or get new health insurance benefits.

What is short term medical insurance?

A short term medical insurance plan is a type of limited-duration health insurance plan. (You might also see it called “short term health insurance for job loss.”)

Depending on where you live, short term medical insurance is available for up to 4 months of total coverage — 3 months plus a 1-month extension — in a 12-month period.

If you were to buy short term medical insurance, you could have different options for coverage. Those could also depend on what state you live in. Options that affect your coverage might include:

• Copays. A fixed amount up front, with no deductible or coinsurance, for services like doctor visits, urgent care visits or prescription drug fills. Often these will be limited to a certain number and any services beyond that will be subject to deductible and coinsurance. (A $25 copay for up to 2 doctor’s visits, for instance.)
• Deductibles. This is the amount you are required to pay before the plan begins paying benefits. For these types of plans, deductibles may range from $2,500 to $15,000.
• Coinsurance. This is the portion of services your insurance pays after you pay your deductible. This portion may range from 50% to 100%.

Covered services may also vary from plan to plan. You’ll want to choose your short term medical insurance plan based on how well you think you could cover out-of-pocket medical expenses without a job. You might also want to budget for medical costs if you were to experience a major health crisis during the 4 months you have the plan. You will not get the same comprehensive coverage you did through your former employer’s plan.

What are some advantages of going with COBRA over short term medical?

There are some definite pros to going with COBRA. These can include:

• Availability. COBRA may be available to anyone who loses their group health plan provided by a former employer who has health coverage for at least 20 employees. Short term medical insurance, by contrast, may be available only in certain states and can be subject to medical underwriting. That means that some insurers could review your medical records and deny you coverage. In addition, preexisting conditions, like cancer or diabetes, are not covered under short term medical insurance.
• Continuity. If you’re undergoing treatment for a medical condition, you may be better off choosing COBRA to ensure that you stay with the care team you’re most familiar with. You may not want to potentially have to change all your providers.
• While your monthly premium may be more expensive than the one you had through your former employer, COBRA can be in place for 18 to 36 months. So you would be covered for a lot longer than the 4-month maximum of short term medical insurance.
• Comprehensiveness. COBRA offers the same level of coverage as your former employer’s plan. That ensures you can continue getting the same type of coverage you are accustomed to. You may not receive coverage that’s as comprehensive if you go with a short term medical insurance plan.

You don’t have to wait for open enrollment to get short term medical insurance. In many cases, you can get healthcare coverage as early as the next day. Find out how.

What are some advantages of going with short term medical over COBRA?

There may be some pros of choosing a short term medical insurance plan, too. Here are a few things to think about:

• Cost. One of the biggest drawbacks of COBRA is cost. Your former employer was likely covering a percentage of the monthly premium for your health insurance plan — but now 100% of that cost falls on your shoulders, plus a potential additional 2% administrative fee. That could add up quickly — and it doesn’t include out-of-pocket medical expenses.

A short term medical insurance plan will likely cost you less than going with COBRA. That also depends on factors like your age and health status. It’s important to understand, though, that you could be denied short term medical coverage if you have a preexisting condition, so cost might not even be a factor.

• Flexibility. Folks who retire early and may not be eligible for Medicare yet could find an advantage in short term medical insurance. (You’re eligible for Medicare once you turn 65 or if you have a disability, end-stage renal disease or Lou Gehrig’s disease.) It could help fill a short lapse in coverage.

Additionally, if you lost your job, then decided to start your own business, short term medical could be a temporary option to choose while you’re getting your books in order. Short term medical insurance doesn’t have a specific enrollment period. Typically, you can apply on any day you want — and sometimes coverage may start the next day.

Do I have any other options besides COBRA and short term medical insurance?

Yes. Losing your job is one of a list of situations defined as a qualifying life event. That triggers something called a Special Enrollment Period, or SEP.

That opens a window, outside of the normal Open Enrollment Period (OEP), when you can buy an Affordable Care Act (ACA) insurance plan either on the federal Health Insurance Marketplace or through a private insurance company.

Typically, that window is 60 days from when you lost your job — though in some cases, you may also have 60 days before that to apply, too.

Some pros of buying a Marketplace plan include:

• Plans tend to be cheaper than going with COBRA.
• They come with “essential” benefits that may provide comparable or even better coverage than what you had through your former employer. You may not be offered the same essential benefits through a short term medical insurance plan.
• Marketplace plans are required to provide children up to the age of 19 with dental and vision coverage. (If you or your spouse wanted dental and/or vision coverage, you could either buy a plan with dental and vision insurance included or buy the 2 plans separately.)
• You won’t be subjected to medical underwriting to get the plan. In other words, you won’t be denied coverage if you have a preexisting condition, like diabetes or cancer.
• Marketplace plans may be renewed on an annual basis during OEP or if you were to get another SEP. That would be for as many years as you’re eligible, generally up to the age of 65. So you may have a Marketplace plan for a lot longer than COBRA or short term medical insurance.

What type of coverage should I choose if I lose my job?

It depends on the person and where they are in life. If you have enough budgeted to cover COBRA while you look for a new job, that might be the appropriate (but more expensive) choice. If you already have a lead on a new job, and you didn’t like your former employer’s plan, a short term medical insurance plan might work to fill the lapse in coverage. You could also forgo either option and buy a Marketplace plan.

Whatever option you choose, the key is having some form of traditional health insurance and staying covered. That’ll keep you healthy until you find a new job — or cut the ribbon at your new company.

Need health insurance for a limited time? Compare short term health insurance plans, or contact a licensed insurance agent at 1-844-211-7730 for more information.

For informational purposes only. This information is compiled by UnitedHealthcare, and/or one of its affiliates, and does not diagnose problems or recommend specific treatment. Services and medical technologies referenced herein may not be covered under your plan. Please consult directly with your primary care physician if you need medical advice.

Source:

Centers for Medicare and Medicaid Services. “COBRA Continuation Coverage.” September 10, 2024. Retrieved from https://www.cms.gov/cciio/programs-and-initiatives/other-insurance-protections/cobra_fact_sheet

Compliance code:
52005-X-0325