How to Maintain Health Insurance During Unemployment

There's no good part to losing your job. Depending on the circumstances, it can be equal parts scary and stressful as you try to figure out how to manage without a major source of income.

But one of the worst parts of losing your job is potentially losing your access to health insurance. Paying any sort of medical expense out of pocket in America can be shockingly expensive. So whether you're perfectly healthy or you have a lot of routine medical expenses, living without health insurance can be costly and dangerous.

Unfortunately, there's no perfect solution for maintaining health insurance while unemployed. You do, however, have some options to consider.

Sign up for COBRA

If you want to maintain the exact same health insurance plan that you had with your employer, your first option will be to see if COBRA is a good fit for you.

What is COBRA?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) contains a provision that allows qualifying participants to continue using their former employer's health insurance plan for a limited time, often no more than 18 months. If your old plan allowed you to access all of the doctors and treatments you need, it may make sense to just stick with that plan until you're able to land a new job and a new health insurance plan.

The issue with COBRA, however, is that in order to maintain your plan you now have to pay the full premium, which is both your share and the share previously covered by your former employer. There may also be additional administrative fees. 

In other words, it can be prohibitively expensive, especially after you've lost a major source of income.

How do you apply for COBRA?

Interested in using COBRA to maintain your existing health insurance plan? Here's how it typically works:

1. After losing your job, your former employer must notify the health plan administrator within 30 days. The plan administrator then has 14 days to send you a COBRA election notice.
2. The COBRA election notice details your rights and the steps to enroll. Crucially, this notice will include information about the cost of coverage and how to make payments.
3. To elect COBRA coverage, you need to complete the election form included in the notice and return it to the health plan administrator within the 60-day election period.
4. After that, you must pay the first premium within 45 days of making your election. Subsequent premiums must be paid on time according to the schedule provided by the plan administrator.
5. As long as you continue to make your premium payments on time, your coverage will continue. Failure to pay premiums can and will result in termination of COBRA coverage.

Purchase a plan directly through HealthCare.gov

Using COBRA to continue on with your old insurance plan isn't the only option for maintaining health insurance. You can also purchase a health insurance plan directly through the Health Insurance Marketplace.

Established through the Affordable Care Act, HealthCare.gov was created as a way for individuals and families to compare and purchase available health care plans. The hope was to make health care more affordable and accessible to all.    

How to use the Health Insurance Marketplace

1. Begin by visiting HealthCare.gov. Some states maintain their own statewide marketplace and may have their own website.
2. Create an account and fill out an application. You'll need to provide details about your household, income, and other relevant information to see what plans are available to you and determine if you're eligible for any subsidies.
3. Compare available health plans. Weigh factors like premiums, deductibles, out-of-pocket costs, and coverage options to determine which plan best suits your needs.
4. Check to see if you qualify for subsidies or tax credits, which can significantly lower your monthly premium costs. These subsidies are based on your household income and size.
5. Choose the plan that best meets your needs. You’ll need to review the plan’s details and agree to the terms before finalizing your selection.
6. After selecting a plan, follow the instructions to enroll. You’ll need to make your first premium payment to start your coverage.

Other options for maintaining health insurance during unemployment

Paying for health insurance through COBRA or HealthCare.gov may be the best way to ensure that you have the coverage you need while you're looking for a new job. Both can be costly, however, and the last thing you want to do while unemployed is spend more money than you usually do.

Here are a few other options to consider.

• Being added to your spouse or partner's plan: If your spouse or domestic partner has a job that offers health insurance, you may be able to join their plan during a special enrollment period.
• Medicaid: If your income is low enough, you might qualify for Medicaid, a state and federal program that provides health coverage for individuals with limited income.
• Short-term health insurance: Short-term plans can provide temporary coverage for a few months to a year. These plans often have lower premiums but may offer limited coverage and not cover pre-existing conditions.
• Catastrophic health plans: If you're under 30 or qualify for a hardship exemption, you may be eligible for a catastrophic health plan that provides coverage for worst-case scenarios. These plans typically have low monthly premiums but high deductibles.
• Health Savings Accounts (HSAs): If you had a high-deductible health plan (HDHP) before becoming unemployed, you could use the funds in your HSA to pay for medical expenses.
• Community health clinics: Some clinics offer medical services on a sliding scale based on your ability to pay. It's not a substitute for insurance, but it can provide affordable healthcare services in a pinch.

While unemployed, you're going to find yourself juggling a lot of financial burdens, but it's important that the health and safety of you and your family always remains your top priority. Once the dust has settled and your income has been restored, if you've incurred debt or had your credit damaged as a result of your unemployment, we can help.

MMI offers free financial counseling 24/7, online and over the phone. And our debt management plan (DMP) had been proven to help people get out of debt quickly and improve their credit score in the process. Get started today to see how MMI can help you.