Medical Insurance Plan Options Upon Loss of Employer Coverage

Under the Affordable Care Act (ACA), all U.S. citizens and residents are required to have medical coverage or may owe a penalty when federal income taxes are filed.  When your employment ends, you lose eligibility for the employer’s health insurance plans, including medical coverage. If you do not have coverage immediately available through a new employer, here are some medical plan enrollment opportunities to consider:

  • Remain on the employer medical plan, for up to 18 months, by electing COBRA. You and any covered family members will be allowed to continue your current medical coverage under COBRA for up to 18 months. Under COBRA, you must pay 100% of the billed premium, plus a 2% administration fee. There is no break in your coverage when you elect COBRA as instructed in your detailed election notice.
  • If married, enroll in your spouse’s employer’s medical plan, if available, within 30 days from the date your employer plan ends (known as a HIPAA special enrollment right). The effective date of coverage should be confirmed with the spouse’s employer and should be no longer than the first day of the month following your request to enroll. If there is a break in coverage before the spouse’s plan goes into effect, you can elect COBRA to cover any gaps.
  • If under age 65, purchase individual medical coverage through the Health Insurance Marketplace. Coverage must be purchased within 60 days from the date of loss of employer coverage or when the COBRA maximum period of coverage expires (known as Marketplace special enrollment periods), or during the open enrollment period held at the end of each year.

The effective date of an individual medical plan is the first day of the month; the month depends on the date you enroll in a plan. While you are waiting for a Marketplace plan to become effective, you can elect COBRA to cover any gaps in coverage. For example, if your employer coverage ends on May 31 and you select and enroll in a Marketplace plan in June, the new plan will go into effect on July 1. In this case, you can elect COBRA for the month of June, and then stop COBRA once the Marketplace plan is effective.

Depending on your annual income, you could qualify for a premium subsidy (tax credits) if you purchase coverage through the Marketplace, or you may qualify for low-cost or free medical coverage through Medicaid. You must contact the Marketplace to determine if a subsidy is available or if Medicaid is an option for you.

You can also purchase individual medical coverage directly through an insurance carrier but can only apply for a premium subsidy when coverage is purchased through the Marketplace.

  • If age 65+, enroll in Medicare, if not already enrolled. If you are no longer working, Medicare will act as the primary payer and needs to be in effect if you have no other group medical coverage in force due to your or your spouse’s current employment. The effective date of Medicare depends on the date you enroll. Contact Medicare for enrollment and coverage information.

Remember that for any new medical plan, timely enrollment is important. If you miss an enrollment deadline, you may be declined coverage and have to wait for a future open enrollment period to enroll.

 

This overview is intended as a guide.  Always check with your employer to determine when your group health plan eligibility begins and ends. Contact your spouse’s employer, the Health Insurance Marketplace or Medicare for detailed medical plan enrollment and benefits information.