Health Insurance Options When You Lose a Job
COBRA vs. Marketplace Insurance Options
If you’ve ever been laid off from a job with health insurance, you’re probably familiar with COBRA continuation coverage. The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives most employees losing a job the right to continue health insurance benefits for a certain period of time (typically up to 18 months) at an increased personal cost.
Known for being an expensive, short-term solution, COBRA was once the only option available to cover the health insurance gap between jobs. Finding a comparable individual or family policies on the open market used to be impossible or out of reach for most people. That has changed with the passing of the Affordable Care Act (aka the ACA or "Obamacare").
Under the ACA, the government’s Health Insurance Marketplace provides individuals a way to shop for coverage on your own, to see how individual and family plan prices compare to COBRA and decide which option makes sense for you.
COBRA coverage is generally available if your former employer had at least 20 full-time employees. Depending on your state’s laws, you may also qualify for insurance continuation if your employer had fewer employees.
Can You Just Skip Insurance Coverage?
Whether you decide to take COBRA or shop for a Marketplace plan, health coverage is a must. Opting out of health coverage is simply not a sensible option for several reasons, including:
- Financial penalties. While the federal “shared responsibility payment” no longer applies as of 2019, some states have individual insurance mandates with financial penalties for lack of coverage.
- Unexpected out-of-pocket expenses. Even young, healthy people can find themselves with steep medical bills after an illness or accident. Uninsured patients often pay more than twice as much as insurers for the same treatments.
- Worse healthcare outcomes. Unsurprisingly, interruptions in access to care lead to worse outcomes for patients. For example, studies have shown that cancer patients with gaps in coverage have worse survival rates than those who have access to continuous health insurance coverage.
Health Insurance After a Job Loss
COBRA is still offered to employees who are laid off or terminated from a job, but these days there is another more permanent solution. When you leave or lose your job, a window opens to the government’s Health Insurance Marketplace, where you can shop for plans in your state or region.
In recent years, open enrollment on the Marketplace has been restricted to the period between November 1 and December 15. However, when you leave a job outside of the normal enrollment period, you have your 60-day enrollment window to shop and sign up for coverage.
You may also be entitled to a special enrollment period in case of certain national emergencies, such as the COVID-19 pandemic. See HealthCare.gov for more information.
Even if you love your current plan and prefer to take COBRA, it pays to visit the Marketplace and compare the costs. COBRA is generally considered the most expensive option but may be comparably priced to some plans depending on where you live and your level of coverage.
Keep in mind that through the government Marketplace, you may qualify for cost-saving premium tax credits, Children’s Health Insurance Premium coverage, or free or low-cost Medicaid based on your income and dependents.
How to Find a Health Insurance Plan
To find coverage and prices in your area, you can visit HealthCare.gov and compare online or call 1-800-318-2596 (TTY: 1-855-889-4325) with questions. You won’t know the full cost of your health coverage until you investigate and find out which options are available to you.
How to Drop COBRA for a Marketplace Plan
If you do decide to take COBRA now, the Marketplace window will close. If you want to shop for your own coverage in the future, you will have to wait until the next open enrollment period to shop for a Marketplace plan.
You can drop COBRA at any time during the open enrollment period to shop for your own policy. However, if it’s not open enrollment period, you have to stick with COBRA coverage unless you get insurance through a new employer.
If your COBRA coverage ends, you must find health insurance on your own. If your coverage ends during a time that’s outside of the open enrollment period, the 60-day window to shop for Marketplace coverage will open to you again.
The information contained in this article is not legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law.
U.S. Department of Labor. “Continuation of Health Coverage (COBRA).” Accessed Oct. 23, 2020.
Nolo. “State Laws on Insurance Continuation.” Accessed Oct. 23, 2020.
HealthCare.gov. “No Health Insurance? See if You'll Owe a Fee.” Accessed Oct. 23, 2020.
KFF.org. “The Uninsured and the ACA: A Primer - Key Facts about Health Insurance and the Uninsured amidst Changes to the Affordable Care Act.” Accessed Oct. 23, 2020.
Cancer.org. “Study: Changes in Health Insurance Coverage Can Harm Cancer Survivors.” Accessed Oct. 23, 2020.
HealthCare.gov. “Enroll in or Change 2020 Plans - only with a Special Enrollment Period.” Accessed Oct. 23, 2020.
HealthCare.gov. “Special Enrollment Periods for Complex Issues.” Accessed Oct. 23, 2020.
HealthCare.gov. “Medicaid & CHIP Coverage.” Accessed Oct. 23, 2020.
HealthCare.gov. “COBRA Coverage and the Marketplace.” Accessed Oct. 23, 2020.