Haris Ashley
Changing jobs can be stressful, and it's important to consider your insurance options during this transition. There may be a waiting period for health insurance at your new job, so it's worth looking into alternative options to ensure you're covered. One option is to use COBRA, which allows you to continue with your former employer's group health insurance coverage for a limited time, usually up to 18 months. Short-term health insurance plans are also available but may offer limited coverage. Alternatively, you can enrol in a plan through the Health Insurance Marketplace, which offers different levels of coverage and premiums. It's important to carefully review your options and choose the coverage that best suits your needs and financial situation.
| Characteristics | Values |
|---|---|
| Options for keeping insurance when changing jobs | COBRA, short-term health insurance, Health Insurance Marketplace, rolling over 401(k) |
| COBRA | Continuation of former employer's group coverage, pay full premium yourself, no waiting periods or exclusions for pre-existing conditions, usually lasts 18 months |
| Short-term health insurance | Less coverage, medically underwritten, more affordable, no open enrollment period |
| Health Insurance Marketplace | Four levels of plans: platinum, gold, silver, and bronze, with different premiums and deductibles, may qualify for a tax credit |
| Rolling over 401(k) | Easier to keep track of accounts, no tax consequences if following certain rules |
What You'll Learn
COBRA coverage options
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that allows workers and their families who have lost their employer-provided health insurance due to specific life events to continue the same group health coverage for a limited period.
Qualifying for COBRA
To be eligible for COBRA, you must have been enrolled in an employer-sponsored medical, dental or vision plan. Your former company must have had 20 or more full-time employees, and you must have been enrolled in a company-sponsored group health insurance plan on the day before the qualifying event occurred.
Qualifying events include:
- Voluntary or involuntary job loss (except in cases of gross misconduct)
- A decrease in the number of hours of employment resulting in loss of employer insurance coverage
- Divorce or legal separation from the covered employee
- Death of the covered employee
- Dependent child turning 26
COBRA Coverage Period
Under COBRA, you can generally continue your employer-sponsored health insurance for a limited time, typically 18 to 36 months. The specific length of your COBRA coverage will depend on the qualifying event. For instance, a divorce or death of a spouse may extend coverage up to 36 months.
COBRA Coverage Cost
COBRA coverage is expensive because you will be required to pay the entire premium plus up to 2% in administrative fees. The cost of COBRA coverage can range from $400 to $700 per month, per individual.
Enrolling in COBRA
You have 60 days to enrol in COBRA once your employer-sponsored benefits end. Even if your enrolment is delayed, your coverage will be retroactive and start from the day your prior coverage ended.
Cancelling COBRA
You can cancel your COBRA benefits at any time. To do so, the primary beneficiary must notify the plan administrator in writing that they wish to terminate the plan.
COBRA Alternatives
While COBRA allows you to maintain your current health plan, there are other alternatives to consider:
- A spouse's health insurance plan
- A health insurance marketplace plan
- A short-term health insurance plan
- A catastrophic health plan
- Children's Health Insurance Program (CHIP)
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Short-term insurance plans
Short-term health insurance plans are a low-cost way to bridge the gap between jobs. They are a form of coverage that provides medical services for a limited period of time, usually between one month and three years. These plans are a good option if you are healthy and don't need regular medical care. However, they have limited coverage and are not available in all states.
Short-term health insurance plans are generally more affordable than COBRA, but they offer much less coverage. They are medically underwritten, meaning that if you have a pre-existing condition, your application may be declined. These plans do not have to cover maternity care, prescription drugs, or mental health care, and there are annual and lifetime limits on benefits.
Short-term health insurance plans can be purchased from any private insurance provider. They are also available through the Health Insurance Marketplace, which offers special enrollment periods for those who have lost their job-based coverage.
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Health insurance marketplace plans
If you lose your job-based health insurance, you can enrol in a plan through the Health Insurance Marketplace. You will qualify for a Special Enrollment Period to get coverage for the rest of the year. You will need to apply within 60 days of losing your job-based coverage and your coverage can start the first day of the month after you lose your job-based coverage.
To enrol in a Marketplace plan, you can start by searching for ACA plans on Healthcare.gov. Each state offers different plans and providers, but all plans must cover essential services such as maternity care, prescription drugs, and mental health care. ACA plans cannot discriminate based on pre-existing conditions.
There are four levels of ACA plans: platinum, gold, silver, and bronze. Each level offers different premiums and deductibles. Bronze plans generally have high deductibles, while full-coverage plans, similar to what you might have had with an employer, would be platinum. Prices vary depending on the plan, provider, and geography. If your income is between 100% and 400% of the federal poverty level, you may qualify for a tax credit that lowers your monthly premium.
Those with lower incomes may also qualify for Medicaid, especially after many states expanded the program during the pandemic. You can apply for Medicaid through your state or the healthcare marketplace.
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Life insurance options
When it comes to life insurance, changing jobs can be a tricky process. Here are some options to consider:
Group life insurance
Group life insurance is a type of insurance that is sold to an employer or association, who then offer it as a benefit to their employees or members. The employer will typically purchase the insurance at wholesale prices, keeping premiums low. Some employers may even offer these benefits without charging any additional costs, while others will allow employees to select a benefit amount and have the premiums deducted from their paychecks.
The main benefit of group life insurance is that it does not require a medical exam, making it ideal for those in poor health. It also usually comes with relatively low premiums as the risk is spread across the group. However, the amount of coverage may be less than what you need, leaving you underinsured.
Individual life insurance
Individual insurance is available to anyone who qualifies and is the best option if you are not eligible for group life insurance or if your employer does not provide sufficient coverage. With individual insurance, you are free to shop the market and compare various types of insurance, including term and permanent insurance, as well as different benefit amounts. However, individual insurance is usually more expensive than group insurance as you pay market rates, and you may be required to provide medical information.
Portability
In some cases, you may be able to take your group life insurance policy with you when you change jobs, a process known as "porting" or "convertibility". However, this is not always possible, and rates may be higher than your original premium. If you are able to port your policy, you will need to complete an application within a set period, typically one to two months, and file it with the insurance company.
Conversion to an individual policy
Another option is to convert your group life insurance policy into an individual whole life policy. Again, this option may come with a higher rate than your original group policy.
Alternatives
If you are unable to take your group policy with you or convert it to an individual policy, there are other alternatives to ensure you remain insured. You could purchase a temporary plan to cover you until your new benefits kick in, or you could negotiate with your new employer to cover the cost of this temporary plan as part of your employment agreement.
You could also consider buying an individual insurance policy, which would provide constant protection regardless of your employment situation. This is a good option if you are concerned about lapses in coverage or if you are unable to qualify for a traditional group policy.
Seek advice
Changing jobs can be a confusing time, and it is important to understand your options to ensure you make the right decisions regarding your insurance coverage. Consider seeking advice from a financial advisor or insurance agent to help you navigate the process and choose the best option for your needs.
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Disability insurance
Changing jobs can be stressful, especially when it comes to figuring out your insurance coverage. Here are some things to keep in mind regarding disability insurance when making a career move:
Evaluate Your Current Disability Plan:
Before making a job change, it's important to understand your current disability coverage. Find out if your current group policy can be transferred to your new position. Also, determine if you can increase your disability coverage if you lose your group policy. If you have an individual policy, review the terms and conditions, as these policies are often based on factors such as your age, occupation, health status, and income.
Compare with Your New Employer's Plan:
Research your new employer's disability insurance plan. Find out if coverage is available and what it entails. Determine if there is a waiting period before you become eligible for benefits. Evaluate if the group plan covers your specific occupation for the entire benefit period.
Consider the Impact of Relocation:
If your new job involves relocating to a different state, compare the premium and coverage of your current individual policy with the new state's offerings. Moving to a more expensive state may warrant increasing your policy before the move, while relocating to a less expensive state could mean purchasing additional benefits after the move.
Understand the Impact of Career Changes:
If your career change involves a shift in occupation or specialty, it's essential to reassess your disability insurance. For example, a policy purchased as a medical student without a declared specialty may offer more favourable rates than a policy for a specialised physician. Similarly, an attorney switching careers to open a restaurant may need different coverage.
Explore Private Disability Coverage:
If you are transitioning to self-employment or your new employer does not offer adequate disability coverage, consider private disability insurance. While it may be more expensive than group insurance, it provides the security of continued coverage. You can always cancel the policy and switch to your employer's plan once you start your new job. Additionally, having two plans can offer more comprehensive protection.
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Frequently asked questions
There are a few options to consider. The first is to use COBRA, a law that allows you to continue your current health coverage at your own expense for up to 18 months. Another option is to get a short-term health insurance policy, which is cheaper but provides less coverage. Finally, you can enrol in a plan through the Health Insurance Marketplace, which may offer savings based on your income.
Confirm the effective date of your new employer's health plan with your HR representative or plan administrator. Knowing when your new plan starts will tell you when you can cancel your temporary coverage without leaving a gap.
You have a few options with your 401(k) as well. You can leave the account as it is, roll over the funds to a new 401(k), roll the money into an IRA, or cash it out. Rolling over your 401(k) makes it easier to keep track of your accounts.
If your employer provided you with life insurance, you may have the option to continue paying for coverage. However, this is rare and the coverage is often not sufficient. Changing jobs is a good time to consider your options and take out your own coverage or supplement it with a new plan.
If you lose your job-based health insurance, you can enrol in a Marketplace plan through the Health Insurance Marketplace or sign up for COBRA coverage. With COBRA, you can continue your former employer's group coverage for a limited time, but you will have to pay the full premium yourself.
