When you quit your job you also lose your employer’s insurance. There are many options to replace that coverage. However, until recently, most of these options were too expensive and difficult to afford if your income was low. The American Rescue Plan relief package, signed March 11, 2021 makes many of these options more affordable.
Here are some things to think about when you’re looking for new insurance. The best option may not be the same as it was in the past because of new subsidies or other assistance.
- Your employer continues to be covered by COBRA with a new subsidy
- Register for coverage through the state’s insurance market.
- You can choose between COBRA or marketplace coverage under the new rules.
- Join the spouse’s plan.
- Register for Medicaid
- Register for Medicare if you’re 65 years old or older
You can continue your employer’s COBRA coverage with a new subsidy
COBRA can be your best option if you lose your job and had health insurance. COBRA is a federal law that requires employers to allow former employees to continue their health insurance coverage up to 18 months after losing their job. COBRA is only for companies with 20 employees or more, although many states have similar laws that apply to smaller employers. The same coverage and provider network will apply to you, and all expenses paid towards the deductible for the previous year will be counted.
Cost has been the downside. Premiums can jump dramatically because both the employer and employee share the cost. Plus, there are sometimes administrative costs of up to 2%. The premiums paid by employers to their employees are generally 75%.
The American Rescue Plan is a change in the equation for those who have lost their jobs unintentionally. The law provides 100% subsidy for COBRA premiums up to six months, starting April 1, and ending Sept. 30, 2021. Karen Pollitz, senior associate at the Kaiser Family Foundation, said that the subsidy might last less than six months for those whose COBRA eligibility has ended before that or for those who are eligible for other job-based coverage.
The new subsidy is only available to those who have lost their job involuntarily. individuals who leave on their own will not be eligible. COBRA coverage will remain very costly for them.
You have 60 days to vote for COBRA after your employer stops covering you. However, a federal emergency regulation temporarily extended this period. Pollitz says that this means that laid off in the summer of last year, for instance, can still elect COBRA.
No matter when you sign up for COBRA, it can only be valid for 18 months from the date of the qualifying event. This would typically be when your employer loses your health insurance coverage. Pollitz explains that if someone is laid off on March 1, 2020, they will be covered by COBRA until August 2021.
Remember that the subsidy is renewable for six months. There is currently no enrollment period for marketplace coverage after the subsidy expires on August 30th. The current rules state that you cannot switch to a market policy until the annual open enrollment period in the fall. New coverage begins January 1. Biden may extend the special enrollment period, but you could be stuck paying full COBRA premiums until then. If you don’t find a new job that offers health insurance benefits, you might not be able to switch to a marketplace policy.
Register for coverage through your state’s insurance marketplace – and maybe get an enhanced subsidy
To purchase an individual policy of health insurance at your state’s HealthCare.gov or Health Insurance Marketplace, you will usually need to wait until Open Enrollment. This generally runs from November 1 through December 15. If you lose your employment, you can still qualify for special enrollment. You have 60 days to purchase a policy through the Marketplace after your employer ceases providing coverage. To find the links to your state’s marketplace, visit HealthCare.gov. You also have the opportunity to sign up this year for coverage. HealthCare.gov has opened a new enrollment period that allows anyone to sign up or switch to coverage from February 15th to August 15th 2021. Similar special enrollment periods are offered by most states that have their own insurance marketplaces. This special enrollment period is available even if your job has not been lost in the last 60 days.
You may be eligible for a subsidy depending on how many people are in your household and your annual income. The American Rescue Plan recently increased the size of the subsidies available for 2021-2022. It’s worth looking into whether you could qualify for a subsidy if your job is lost. This could reduce your premiums significantly.
The previous calculations assumed that a household would contribute no more 9.8% of its income to health insurance costs. Lower income households contributed a lower percentage to the premiums. American Rescue Plan increased that maximum contribution to 8.5%. The previous rules stipulated that the subsidies could only be granted to those who earned less than 400% of federal poverty; the new rules remove this income limit.
“This means that the government expects families to use less of income towards health insurance costs, and is using stimulus money to make up for the difference,” states Matt Rosenberg, a certified personal accountant in Grand Junction, Colorado and member of the American Institute of CPAs Financial Literacy Commission. This should increase the premium tax credit a family receives. The goal is to lower premiums for all families.
The Health Insurance Marketplace Calculator from the Kaiser Family Foundation can provide a quick estimate for your premiums after subsidy. It has been updated with new subsidy figures. The specific numbers for each policy can be found at the state’s insurance marketplace.
A couple of 40-year-olds living in Chicago with a 2021 income of $40,000 could be eligible for a $580 monthly subsidy. This would reduce their premiums to $109 per months for a mid-level policy. They would have to pay $689 monthly without the subsidy. To calculate your subsidy, you will need to determine your income for the entire year.
Individuals who have policies may go to HealthCare.gov and update their premium tax credit. This will lower their monthly premiums. The changes should be made in 36 states that use HealthCare.gov by April. However, it may take some time for 14 states and the District of Columbia to update their systems. Rachel Schwab, research associate at the Center on Health Insurance Reforms of the Georgetown University Health Policy Institute, said that the process might take longer in those states. You may get more back if your premiums don’t change during the year.
People who received unemployment benefits in 2021 were eligible for an additional subsidy through the American Rescue Plan. A subsidy may be available that covers the entire cost of the silver-level, second-lowest-cost plan in their region. You can estimate the unemployment subsidy using the Kaiser Family Foundation calculator.
Even if your uninsured status has been for a while, you have until August 15, 2020 to enroll in a Marketplace plan at HealthCare.gov or any state marketplace. Pollitz says that people who are not yet enrolled in Marketplace Plans can and should return to check if they can afford coverage.
If they feel that a cheaper plan is available, people who have Marketplace coverage through HealthCare.gov or other states can switch to it before August 15. Pollitz says that while some people used their subsidy to bronze-level plans to reduce (or eliminate) monthly premiums they ended up signing up for very high bronze deductibles. A silver plan may have lower deductibles, which could make it more affordable. Silver-level plans have higher premiums, but lower deductibles and cost sharing than bronze-level policies.
Some state-based marketplaces only allow people to purchase new health insurance if their existing coverage is not sufficient. Schwab says that these rules could change. Consumers should consult their marketplace to find out what options they have.
Choose between Marketplace Coverage and COBRA Under the New Rules
If you lose your job involuntarily and are eligible for the COBRA subsidy you will have $0 premiums for up six months. This may be cheaper than market coverage with premium tax credits. If you leave your job involuntarily, however, you won’t be eligible for the COBRA subsidy. You may have to pay a lower premium for subsidized market coverage, particularly if your income has fallen.
Premiums are only one aspect to be aware of. If you have already paid for your deductible for 2021 and had to pay some medical expenses this year, you can still claim credit under a COBRA policy. If you want to switch to marketplace coverage, however, you will need to start the deductible again.
John Barkett, senior vice president of policy affairs at Willis Towers Watson and benefits consultant, says that if you have had a catastrophic event in the past year and have already paid your deductible, you should stay on the COBRA plan. You will get credit for any cost-sharing you paid. You could need to restart the clock if you make changes to your plans.
Find out if your doctors, hospitals, and other providers are included within the new plan’s network. Compare your cost-sharing for prescription drugs and medical care under the policies. Pollitz says that people in ongoing treatment may prefer to stay with the same provider. Marketplace policies may have higher co-payments and deductibles than COBRA.
Pollitz says, “It is important to examine the monthly premium to determine what coverage options are available, what providers you have access to and what your out-of-pocket expenses for covered services will likely be.”
Join your Spouse’s Program
If your spouse is still working and has coverage through their employer, you might be able to join as a dependent once you quit your job or lose your employer’s insurance. To add you to the coverage, find out how much your premiums will rise.
Register for Medicaid
You may be eligible for Medicaid depending on your income and where you live. The income eligibility for adults in 36 states that expanded Medicaid eligibility under Affordable Care Act is 138% below the federal poverty level. Your monthly income is more important than your annual income. You may be eligible even if your first few months were well-paying, but then lost your job. Pollitz says that Medicaid is open year-round for enrollment. You can use the Medicaid quick screening tool to determine if you are eligible based on your income, state, and number of members in your household. Links to the Medicaid websites of your state will also be provided. You can learn more at Medicaid.gov.
Register for Medicare if you’re 65 years old or older
You can sign up Medicare beginning three months prior to the month that you turn 65. Even if you do not want to sign up yet for Social Security benefits, it is easiest to register online at the Social Security Website.
You have eight months to cancel your coverage if you don’t sign-up for Medicare Part B because you are working. It’s best to act quickly after you quit your job in order to avoid coverage gaps. Medicare is your primary coverage if you don’t have any health insurance from your current employer. COBRA is not considered coverage from an employer.