One of the many challenges associated with leaving a job is what happens to the health insurance you have for you and your family through your company—specially if you don’t already have new employment with new benefits lined up, or you are planning to start working for yourself.
When you get the news that you have been laid off or terminated, the questions of health insurance might not be the first thing on your mind. But it should be considered, and health insurance can expire immediately. If you don’t do anything, you and your family can be left without coverage.
So, exactly how long does your health insurance last after leaving your job?
Read on as we answer this question and look at your options for what you can do to cover yourself when you lose your employment-based health insurance.
How Long Does Health Insurance Last After Being Laid Off?
How long your health insurance continues after you are laid off depends on the company. There are no regulations that say they need to continue your insurance, and it can be terminated immediately.
It is common that health insurance will continue until the end of the month that your contract was terminated. That means that if you are laid off on the first of the month, your coverage continues for about four weeks. But if you are laid off near the end of the month, your coverage will terminate almost immediately.
Depending on the specific circumstances of your termination, your employer might make alternative arrangements with you. But it is very uncommon to extend health insurance coverage beyond the end of the month.
Extending Your Employment-Based Insurance
The Department of Labor does allow you to extend your employer-based health insurance for a period of up to 18 months under the Consolidated Omnibus Budget Reconciliation Act, also known as COBRA.
You are eligible if your company has a minimum of 20 employees and is still offering group health insurance. If they terminate their insurance program, then you have no recourse in COBRA, as it works by paying into your ex-employer’s existing group health insurance program for employees.
The only other reason that you would not be eligible for COBRA is if you were dismissed for gross misconduct.
The 18-month extension can be longer in certain situations. For example, disabled persons usually get coverage for 24 months. It can also cover the spouse of an employee who has died for up to 36 months.
However, while you can retain the same coverage that you had when you were employed, you will no longer split the cost with your employer. You will be responsible for paying the entire premium yourself, plus a 2% additional fee. So you will be paying 102% of the total premium.
This can be very expensive. A standard employer-based health insurance policy costs around $20,000 per year. When you are employed, you will pay around a quarter or a third of these costs, and your employer covers the rest. So, suddenly, you are looking at a very big bill to cover your health insurance costs.
You will receive the details of COBRA when you are terminated and then have 60 days to take up the policy. When you do, your policy will be retroactive and you will need to pay the premiums for the 60 days that passed as well as future premiums.
You are then free to cancel the plan whenever you wish.
It is also possible to refuse the plan for yourself but accept it for your dependents. This can be an alternative solution if you can’t afford to continue the policy for everyone.
COBRA is also available for employees whose hours have been reduced and therefore are no longer eligible for their company’s health plan.
COBRA is not the only option you have for covering yourself once you lose your employment-based health insurance plan.
Your Spouse’s Insurance
First, you may be able to get coverage through your spouse’s health plan. How exactly this will work depends on the details of their plan.
You may not have considered this before, as companies will often charge a surcharge if they know that a spouse has access to another employer’s health plan. You will certainly want to move any children who may have been covered by your health plan onto your spouse’s plan.
You may also be eligible for Medicaid. This is health insurance for low-income Americans. In most states, anyone who earns up to 138% of the poverty line is eligible for Medicaid.
Private Health Insurance
You can, of course, also invest in private health insurance. It won’t matter if you are outside of the standard open enrolment period of health insurance, which usually falls in November and December, as your change in employment circumstances will mean that you qualify for a special enrollment period.
These plans can be as expensive as an employment-based plan through COBRA, but you can have flexibility in the level of coverage you choose, which can help keep costs down as you only pay for what you need.
To find out more about the different health insurance plans, read our review of the best health insurance companies.
If you earn less than 400% of the national poverty line, what you spend on your policy is also tax-deductible.
You can browse health insurance policy options on online marketplaces like eHealth. Read our full eHealth review here.
Short-Term Health Insurance
If you are only looking to cover yourself for a short period of time between jobs, short-term health insurance is also an option.
It is not technically considered health insurance by the government, as it does not cover some key necessities such as prescription medicines, mental health, or maternity care. The premiums on these policies are also high, and you can only have the plan for a short period of time (the exact length of time depends on what state you are in).
Choosing The Right Option
So, how do you know which is the right option for keeping your health insurance after you have been terminated?
The three main things to consider are your future employment prospects, your dependents, and your level of risk.
If you are married and your partner has access to health coverage through their job, the cheapest way to get the most comprehensive coverage is to move onto their insurance. But, this option is not available to everyone.
If you have a good chance of starting new employment soon, that will come with health benefits, you may be able to afford to pay the high premiums on COBRA for a few months. If you don’t have dependents who rely on you and your health is good, you might also be able to rely on a less comprehensive short-term policy for a few months without any major concerns.
If you do have health concerns such as diabetes or back problems, it is probably worthwhile retaining your more comprehensive COBRA coverage.
If the current job market means you will probably find it challenging to find new work, then you may find that you qualify for Medicaid. It is worth investigating this immediately, so you can make a decision on this before the 60-day window for opting for Cobra passes.
If you are thinking about going into business for yourself, looking after your own health insurance is something you need to invest in for the long term. This means that you should start looking at private health insurance policies.
Remember that health insurance premiums are changed annually, so if you need to go for a more basic policy today, you can always upgrade your policy when your business is booming and you have more funds to invest in health insurance.
Although the exact length of time differs, you shouldn’t expect your health insurance to last for long after you have been fired or terminated from your job.
This can leave you scrambling for options for how to cover you and your dependents. While you have several options, with the exception of Medicaid, none of them is cheap.
However, it is rarely the right choice to go without coverage completely. If you can’t afford to pay premiums, imagine what will happen if you find yourself hit with a big, unexpected medical bill that you are unable to pay.