Whether you're unemployed or a part of our nation of job-hoppers, you’ll probably wind up with short gaps in employment. This means you’ll need to find health insurance while you’re between jobs.
Money is often tight during such times. So what choices do you have when you need health insurance and have no income? The answer may surprise you. In addition to COBRA, which allows continued coverage under your existing group benefits, options may include short-term health insurance, individual major medical insurance (also known as an ACA plan or Obamacare), and Medicaid.
What you choose will depend on a few factors, including your circumstances, how long you need benefits, what coverage you qualify for, your budget, and your healthcare needs. Let’s take a closer look at each of the four affordable options to see how they differ and why you might pick one over another.
COBRA, which stands for the Consolidated Omnibus Reconciliation Act, allows you and your family to temporarily continue group health coverage when you would otherwise lose it. You retain the same benefits and provider networks you already have when you elect COBRA.
To qualify for COBRA, you must be enrolled in your employer’s health plan and experience a qualifying event that would cause you to otherwise lose that coverage. Qualifying events for covered employees include:
There are additional qualifying events for the spouse and dependent children of covered employees.
This option tends to be a fit for those who want to keep the coverage they already have, regardless of cost. Some reasons you might prefer to elect COBRA include having met or paid into your plan deductible for the year, wanting to continue care through your existing in-network healthcare providers, or not wanting to switch plans because you like the one you have.
You want to look into COBRA alternatives if you can’t afford the premiums or will be moving out of your plan network after becoming unemployed.
Cost: Typically your full premium (including any portion your employer covered) plus a 2% administrative fee. The amount cannot exceed 102%.
Enrollment: To elect COBRA, you have at least 60 days from either the date you were provided with your COBRA election notice or the date you would lose coverage, whichever is later.
Coverage length: 18 or 36 months depending on the qualifying event and extending from the date it occurred. Under some circumstances, coverage may be extended if a second qualifying event occurs.
COBRA coverage may be terminated early if your premiums aren’t paid in a timely manner, your employer discontinues the group health plan, or you begin new coverage through another group health plan, to name a few reasons.
When you’re unemployed and can’t afford COBRA premiums, you may want to consider short term health insurance as an alternative. These plans are designed for temporary situations, and the benefits they include reflect that purpose.
Short-term medical insurance is more limited than group or individual major medical insurance. It helps pay for covered medical expenses related to injuries and sudden illnesses. Most short-term coverage includes benefits for doctor office visits, hospitalization, and emergency care. Plans vary, of course, and some have benefits for a few basic preventive screenings or extra non-insurance benefits for dental and vision care.
Short-term plans don’t include all of the 10 essential health benefits (e.g., maternity) and preventive services required by the Affordable Care Act (ACA), and aren’t likely to cover pre-existing conditions. As such, premiums tend to be lower than COBRA and individual major medical premiums—you aren’t getting the same level of coverage.
That said, trimmed down benefits for unexpected healthcare along with potentially leaner premium rates can make short-term insurance an attractive option when you know your unemployment will be brief or you’ve already started your next job and are still in your new employer’s waiting period for benefits.
Short-term health insurance tends to be a better fit for those in relatively good health. Why? Again, your policy won’t likely cover pre-existing conditions. Plus, not everyone qualifies for a short-term policy. Unlike group and individual major medical insurance, short-term medical insurance is not guaranteed issue. When you apply for coverage, you’ll need to answer a few health-related questions to determine your eligibility, and your application could be denied based on your health history.
Cost: Typically less than COBRA and individual major medical insurance (i.e., ACA plans, Obamacare plans) sold through the state and federal health insurance exchanges as well as in the private market.
Enrollment: Year-round. Learn within minutes whether or not your application has been approved. If approved, you can begin coverage as soon as the next day.
Coverage length: 30 to 364 days—policy length varies by state. You choose your policy length when you apply and, if your application is approved, enroll in short-term coverage. If your policy ends and you need more coverage, you may be able to apply for a new policy—the ability to apply for subsequent policies also varies by state.
If COBRA costs feel too steep and short-term benefits feel too lean, you may want to look into individual major medical insurance. These plans are colloquially known as ACA or Obamacare plans. They will likely cost you less than COBRA, especially if you qualify for a subsidy, and they will more closely resemble your job-based coverage than a short-term plan does.
Major medical insurance fulfills ACA requirements for minimum essential coverage, meaning it includes all of the 10 essential health benefits as well as specified no-cost preventive services. That’s why unsubsidized premiums will, for the most part, be higher than short-term plan premiums—with an ACA plan, you are gaining access to more comprehensive benefits.
However, if you qualify for subsidies, an ACA plan will likely cost you less than COBRA and short-term coverage. In that case, you should probably choose an ACA plan to obtain the most coverage for your dollar.
This option tends to be a better fit for those who:
Major medical insurance is guaranteed issue. You can’t be denied coverage based on your health history. For the most part, anyone who lives in the United States, is a U.S. citizen or legal resident, is not incarcerated, and is not enrolled in Medicare will automatically qualify.
Cost: ACA premiums vary based on five factors—your age, location, tobacco use, individual or family enrollment, and plan category selected.
Subsidies can also have an impact on the cost of coverage and care. Premium tax credits help reduce what you pay for coverage each month, and cost-sharing reductions for silver plans will help lower your out-of-pocket cost-sharing responsibility (i.e., deductible, coinsurance, copay amounts). Subsidies are based on income. You also have to buy coverage through a state or federal exchange to qualify.
Enrollment: Annual open enrollment typically runs from November 1 through December 15 (though it may vary for some state-based exchanges). Outside of this time, you must experience a qualifying life event for a special enrollment period; qualifying life events include losing job-based benefits, moving, and changes to your family.
Coverage length: The entire calendar year, as long as you continue to pay your premiums. During open enrollment, you can renew your plan (your deductible will reset on January 1).
If you are unemployed and have no source of income, it’s possible you’ll qualify for Medicaid plan that provides health coverage to millions of Americans.
Medicaid programs vary by state—each state designs and runs its own program based on federal guidelines. However, Medicaid in every state fulfills the ACA’s minimum essential coverage requirements. Each state program includes benefits mandatory under federal law (e.g., hospital services, laboratory and X-ray services, physician services) and possibly optional benefits such as prescription drug coverage and physical therapy.
Anyone whose household income is below 138% of the federal poverty level in states that expanded Medicaid under the Affordable Care Act will qualify. If you live in a state that didn’t expand its Medicaid program, you’ll need to meet other eligibility criteria set by your state. Populations often covered by Medicaid include low-income adults, children, pregnant women, elderly adults, and people with disabilities.
Cost: Anywhere from nothing to a few dollars per month, depending on your state.
Enrollment:Year-round. Your coverage may begin on the date of application or the first of the month after your application is approved. If you were eligible before you applied, you may also be covered retroactively up to three months prior to your month of application.
Coverage length: Month to month as long as you qualify. You may be asked to verify your eligibility.
In addition to COBRA and the alternatives listed above, you may have other ways to obtain coverage while you’re between jobs. For example, you might have access to health insurance through your spouse’s job-based plan or even a parent’s plan if you are under age 26.
There isn’t one single option that’s considered right for everyone.Your decision ultimately comes down to cost and covered medical expenses. What can you afford? What level of benefits do you need and feel comfortable with?
You may want to start by looking into each option more closely. Find out what COBRA will cost you. Gather quotes for a few short-term and major medical plans. See if you might qualify for an ACA subsidy or Medicaid.
If you have questions or need help understanding your options along the way, there are many resources available. You may want to contact your employer’s human resources department, the customer service team for an insurer whose plan you’re considering, a helper through your state or federal health insurance exchange, or a licensed health insurance agent.