Medical Insurance Options for Unemployed Individuals
This article will explore a few coverage options for when you need health insurance between jobs:
- Short term medical insurance: temporary benefits for as few as 30 days
- Hospital indemnity: fixed-dollar benefits for hospital, surgical and critical illness care
- Bundled benefits: enroll in a short term medical policy and hospital indemnity policy at the same time
- Major medical insurance: an ACA-compliant option that may include an individual policy or a spouse’s job-based policy
Oftentimes, money is tight when you’re in between jobs with benefits, and that can make it tempting to go without health insurance. But when you’re uninsured, you can feel vulnerable to medical bills—accidents and illnesses are rarely predictable and won’t wait for a “convenient” time to strike.
Having some form of insurance coverage until you secure another job with benefits can help reduce what you pay out of pocket for medical expenses. Fortunately, unemployed individuals have several temporary and long-term health insurance options for health insurance between jobs, including COBRA as well as several other alternatives.
First, let’s talk about the Consolidated Omnibus Reconciliation Act, which is commonly called COBRA. COBRA allows employees and their dependents to retain their job-based health insurance benefits for a limited time following certain qualifying life events that impact their coverage eligibility.
For instance, as an individual employee, qualifying events include losing coverage due to1:
- Being terminated from your job due to any reason other than gross misconduct
- Reducing the hours of your employment
Additional qualifying events may apply for spouses and dependent children of covered employees.
Available year-round? You may elect COBRA coverage within 60 days of your qualifying event.2
Policy length: Laid off workers eligible for COBRA continuation coverage are allowed by law to keep their group coverage for a limited time —18 to 36 months, depending on the circumstances.3
Cost considerations: As far as health insurance between jobs is concerned, an individual electing COBRA is responsible for their entire monthly premium, including the portion previously covered by their employer, plus a 2% administrative fee.4 In turn, you will keep the health insurance you had through your employer and continue to have access to the same benefits and provider networks; the only change is what you pay for this coverage.
According to the 2017 Kaiser/HRET Employer Benefits Survey, the full annual cost of employer-sponsored health insurance for an individual averaged $6,690 in 2017.5 The survey reported $18,764 as the average, full annual cost of employer-sponsored health insurance for a family in 2017.6 Based on these amounts and the 2% administrative fee, the average monthly COBRA payment would be $568.65 for an individual and $1,594.94 for a family.
How to apply: Your group health plan must provide you with a Summary Plan Description that explains your COBRA rights within 90 days of becoming a plan participant.7 Once you have a qualifying event that makes you eligible for COBRA, depending on the nature of your qualifying event, you or your employer must notify your group health plan.
Within 14 days of receiving notification of a qualifying life event, your plan must notify qualified beneficiaries (i.e., you and your dependents) of their rights to continuation coverage and how to make an election.
You have an election period of at least 60 days, which begins on the later of the date you are provided with the election notice or the date you would lose coverage.8
What you need to know: Regardless of COBRA’s price, one advantage is that it allows individuals and families to maintain comprehensive coverage with access to the same benefits and provider networks. This can be especially helpful to those who have ongoing healthcare needs.
Learn more about eligibility in the US Department of Labor’s “Frequently Asked Questions: COBRA Continuation Health Coverage,” or contact your employer’s benefits adviser.
4 alternatives to COBRA
While COBRA can help you retain your job-based group major medical insurance, that insurance could cost you more due to the absence of an employer contribution and the additional 2% administrative costs.9
As mentioned above, even with the added cost, there are reasons you may elect COBRA continuation coverage such as wanting to maintain the exact same health insurance benefits and access to the providers with whom you’ve already established care.
However, if you do decide to waive COBRA continuation coverage, you may have alternative health insurance options. Although less expensive, these alternatives provide limited benefits when compared to COBRA continuation coverage.10 Alternative health insurance isn’t ACA compliant and doesn’t cover essential health benefits.
1. Short term health insurance
If you need temporary health insurance between jobs (and you need it quickly), then short term health insurance can provide benefits for as few as 30 days and as soon as the day after your application is accepted.
During a period of unemployment, short term health insurance provides a range of benefits that help pay for unexpected medical expenses related to emergency room visits, hospitalization, surgery and more. Some plans even include limited coverage for certain pre-existing conditions or a few preventive services.
Available year-round? Yes.
Policy length: As few as 30 days and up to 364 days depending on your state.
Cost considerations: Unlike major medical insurance, short term health insurance is not required to include the 10 essential health benefits or the full scope of no-cost preventive services required by the ACA. This limited nature is what sometimes makes short term health insurance premiums lower than unsubsidized major medical insurance or COBRA. As with any insurance, the more robust short term health insurance coverage you select, the higher the premium rate and vice versa.
How to apply: You can quickly and easily apply for short term health insurance online. Coverage may begin as early as the next day. To determine eligibility, you must answer a few health-related questions.
What you need to know: Short term health insurance is not ACA compliant. As mentioned above, that means it is not required to include the 10 essential health benefits or the full scope of no-cost preventive services required by the ACA. You can be denied coverage based on your health history.
2. Hospital indemnity insurance
Hospital indemnity insurance is fixed-benefit indemnity coverage that can help with expenses related to hospitalization, surgery and critical illness. Hospital plans may also include benefits for additional services such as ambulance services, chemotherapy, and radiation as well as optional benefits for preventive care, X-rays and other services.
You can enroll in a hospital indemnity plan whether or not you have other health insurance coverage; however, these standalone policies are separate from any other coverage you may have.
Available year-round? Yes.
Policy length: Hospital indemnity insurance policies last a full year.
Cost considerations: Hospital indemnity insurance policies provide specified, fixed-dollar amounts for covered hospital services and durations.
The benefit paid will match what is outlined in your plan, regardless of the actual cost of the medical care you receive. The amount may be per day, per week, per month, per visit or per event, depending on the benefit that applies.
For example, if you had a hospital plan that paid a daily intensive care benefit of $3,000 per day and were in intensive care for 2 days, then the benefit amount would be $6,000 ($3,000 per day x 2 days).
What you need to know: As with short term health insurance, hospital indemnity insurance is not ACA-compliant coverage. Hospital indemnity plans are not required to include the 10 essential health benefits or the full scope of no-cost preventive services required by the ACA. You can be denied coverage based on your health history.
Learn about health insurance bundles that include short term + hospital indemnity insurance policies.
3. Major medical insurance (Obamacare for the unemployed)
It’s common for people to use the slang term Obamacare interchangeably with the Affordable Care Act (ACA), but it’s important to understand that they are the exact same thing. Obamacare/ACA plans are major medical insurance that is sold through HealthCare.gov, state-based exchanges and the private market.
Individual major medical insurance plans that qualify as minimum essential coverage will most closely resemble employer-sponsored benefits. As such, they are often a good option for those who need long-term health insurance coverage or have pre-existing medical conditions and/or health conditions that require continuous care.
Consumers may choose from four coverage tiers that are categorized by cost-sharing percentages—read more about the Obamacare metal plans. As required by law, individual major medical insurance plans include certain preventive services at no additional cost and medical services in 10 categories of essential health benefits.
Available year-round? Major medical plans are only available during open and special enrollment periods.
Under certain circumstances, losing your job-based health insurance is a qualifying life event that makes you eligible for a special enrollment period—a period of time during which you can purchase major medical insurance outside of the annual open enrollment period. Otherwise, you must purchase individual major medical insurance during the annual open enrollment period, which typically takes place from November to December.
Policy length: Plans are good for the current year, and they may be renewed for the next year during open enrollment if they are not discontinued.
Cost considerations: If you buy major medical insurance from HealthCare.gov or a state-based health insurance exchange and meet certain income criteria, you may qualify for an Obamacare subsidy. Advanced premium tax credits can lower what you pay for coverage each month, and cost-sharing reductions lower what you pay out of pocket for healthcare.
Use our Health Insurance Calculator to estimate your subsidy.
How to apply: You can purchase major medical insurance from HealthCare.gov or your state’s state-based health insurance exchange as well as in the private marketplace from a health insurance producer or health insurance company.
What you need to know: Major medical insurance is considered minimum essential coverage that fulfills the individual mandate. It is guaranteed issue, which means you will qualify for coverage regardless of your health history and cannot be charged more based on your health history. Premium rates are based on five factors: age, location, family size, plan category and tobacco use.
In addition to individual major medical insurance, you may have access to your spouse’s job-based health insurance; your spouse will need to check with their employer to verify.
Medicaid is a state-federal program that extends healthcare coverage program to adults and children who qualify based on income and other circumstantial criteria.
Medicaid eligibility varies by state, but some states have expanded their program to include single adults who earn up to 138 percent of the federal poverty level. As of July 2018, a total of 34 states, including the District of Columbia, had expanded their Medicaid programs under the Affordable Care Act.11 In states that did not expand Medicaid, other eligibility criteria apply—visit Medicaid.gov for state-related specifics.
Available year-round? Yes—there is no designated open enrollment period for Medicaid.
Policy length: Medicaid coverage is based on month-to-month eligibility.
Cost considerations: Medicaid provides low-cost or no-cost healthcare coverage, depending on your household income and your state’s program criteria.
How to apply: You may be able to apply for Medicaid through HealthCare.gov or a state-based health insurance exchange. Visit Medicaid.gov for enrollment details in your state.
What you need to know: Medicaid is considered minimum essential coverage that fulfills the ACA’s individual shared responsibility provision (i.e. individual mandate).
Supplemental insurance + add-on products
You can buy additional benefits to help reduce your out-of-pocket healthcare costs. These include supplemental insurance that provides lump-sum cash benefits for covered accidents and critical illnesses that can be used toward your medical bills and household expenses as well as the following add-on products:
- Telemedicine, which provides remote consultations with board-certified physicians to help reduce your office visit spending—available 24/7. Learn more about Telemedicine.
- Dental insurance, which can help reduce what you pay out of pocket for dental exams, cleanings and other dental work. Learn more about dental insurance.
- Rx discount cards, which can help reduce what you pay out of pocket for prescription medications. Learn more about Rx discount cards.
Supplemental and add-on products are separate from one another and your other health insurance coverage. You can shop for them online through websites such as healthedeals.com and purchase them through a health insurance producer or directly from a health insurance company.
Summary + next steps
There isn’t one coverage solution that’s perfect for everyone who is unemployed, so remember that you have a range of options for health insurance between jobs. The list above includes COBRA and some common alternatives, but it is by no means exhaustive.
It is important to consider your budget and healthcare needs when making a decision. You may want to consult a health insurance producer before you buy.
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