Haris Ashley
Losing your job can be a stressful experience, and it's important to know how to manage your health insurance coverage during this time. In the US, more than 50% of people receive health insurance through their employers, so it's a common concern for those who are laid off. While you may be focused on finding new employment, it's crucial to prioritize understanding your insurance options and getting the most out of your current policy. This includes scheduling any necessary medical appointments and making a plan to obtain new coverage before any deadlines pass. Depending on your financial and medical situation, you may opt for an alternative plan or explore options to maintain your current coverage.
| Characteristics | Values |
|---|---|
| Loss of employer-sponsored insurance | Counts as a qualifying event for a special enrollment period of 60 days |
| COBRA | Continuation of the same health insurance plan for 18-36 months; 100% of costs to be paid by the employee |
| ACA | Average plan costs are $331 a month for the lowest tier; May have to change doctors and medications |
| Flexible Spending Account | "Use it or lose it" policy; Expenses must be incurred during employment |
| Health Savings Account | No stipulations on when the money must be spent |
| Medicaid | Available in 40 states for those with a household income of up to 138% of the federal poverty level; Eligibility varies by state |
| Short-term health insurance | May have higher premiums than Marketplace plans; Not regulated by the ACA |
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What You'll Learn
- COBRA plans let you maintain your current health insurance for up to 36 months
- Losing your job-based insurance is a qualifying event for special enrollment
- You may be eligible for Medicaid if you have no income
- Use your Flexible Spending Account (FSA) for health expenses incurred during employment
- If you have a Health Savings Account (HSA), you retain ownership and access
COBRA plans let you maintain your current health insurance for up to 36 months
Losing your job doesn't necessarily mean losing your health insurance. COBRA, the Consolidated Omnibus Budget Reconciliation Act, lets you maintain your current health insurance for up to 36 months. This is especially helpful if you want to continue seeing your same doctors and receiving the same health plan benefits. Your dependents (i.e., spouse, former spouse, or children) are also eligible for COBRA coverage, even if you don't sign up.
COBRA is a good option if you need temporary health coverage between losing job-based insurance and starting a new health plan. It can be expensive, as you'll pay 100% of the plan costs, including monthly premiums and a possible 2% administrative fee. However, if you've already met your deductible, you'll likely have fewer out-of-pocket expenses.
To enrol in COBRA, you have 60 days from the date your employer-sponsored benefits end. This coverage is available to employees who have lost their jobs, as well as those who have had their hours reduced, gotten a divorce, or experienced other qualifying life events. The length of COBRA benefits depends on the qualifying event, with 18 months for reduced hours or termination, and up to 36 months for other events.
It's important to note that COBRA may not be an option if your former company has gone out of business. In that case, you may need to consider alternative plans, such as those available on the Affordable Care Act (ACA) marketplace. Losing your job is a qualifying life event, so you can access a marketplace plan regardless of timing. These plans can be more affordable, especially if you qualify for tax credits and cost-sharing reductions.
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Losing your job-based insurance is a qualifying event for special enrollment
A special enrollment period generally lasts 30–60 days before or after the qualifying life event, during which an individual is allowed to make plan changes or sign up for a new health insurance plan immediately. Your coverage can start the day of the event, even if you enroll in the plan up to 60 days afterward.
If you choose to enroll in a new plan, you may need to replace your current doctors or pay out-of-network rates, and you may have to change your current medications to alternatives covered by your new plan. You may also need to prove that you lost health insurance through your job. When you apply for Marketplace coverage, it will tell you if you need to submit documents to confirm your loss of coverage.
If you’ve previously been in a high-deductible health plan (HDHP), you may have established a health savings account (HSA) in the past. As with 401(k) retirement accounts, you retain ownership of and access to your HSA even if you’re laid off. And unlike flexible spending accounts (FSAs), HSAs can be used to cover healthcare premiums with tax-free money.
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You may be eligible for Medicaid if you have no income
Losing your job can be a stressful situation, especially if you are concerned about losing your health insurance coverage. If you have no income, you may be eligible for Medicaid. Medicaid is a federal- and state-funded program that provides free or low-cost health care coverage for certain individuals and families who meet specific financial and non-financial criteria.
Eligibility Criteria
Eligibility for Medicaid is based on income and family size, and the rules differ among states. In general, individuals with low or no income, children, parents, pregnant individuals, elderly people with certain incomes, and people with disabilities may qualify for Medicaid. Some states have expanded their Medicaid programs to cover more individuals, including adults below a certain income level. As of 2025, 40 states have expanded Medicaid, providing coverage if your household income is up to 138% of the federal poverty level.
Enrollment Process
To determine your eligibility for Medicaid, you must complete an application through the Health Insurance Marketplace. You can create an account on HealthCare.gov and provide information about your household size, income, and state of residence. If it appears that someone in your household may qualify, your application will be forwarded to your state for a final eligibility decision. It's important to note that eligibility may be retroactive for up to three months before the month of application if you would have been eligible during that period.
Alternative Options
While considering Medicaid, it's worth exploring other options to ensure continuous health coverage. Losing your employer-sponsored insurance is considered a qualifying event, allowing you to enroll in a special enrollment period for 60 days after your previous coverage ends. You may also look into short-term health insurance plans or consider continuing your current insurance through the Consolidated Omnibus Budget Reconciliation Act (COBRA), which allows you to maintain your existing coverage for up to 36 months, although you will bear the full cost. Additionally, if you've had a high-deductible health plan, you may have access to a health savings account (HSA) to cover healthcare premiums with tax-free money.
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Use your Flexible Spending Account (FSA) for health expenses incurred during employment
If you have a Flexible Spending Account (FSA), you can use it to pay for certain health expenses for yourself, your spouse, and your dependents. This includes deductibles and copayments, prescription medications, and over-the-counter medicines with a doctor's prescription. However, it's important to note that FSA funds cannot be used for insurance premiums.
To use your FSA, you submit a claim to your employer, along with proof of the medical expense and a statement that it hasn't been covered by your plan. You will then be reimbursed for your costs. The IRS determines which expenses can be reimbursed, and you can find eligible expenses listed on their website.
It's important to be mindful of the "use it or lose it" rule with FSAs. Generally, you must use the money in your FSA within the plan year, and any unused funds will be forfeited. However, your employer may offer a grace period of up to 2.5 extra months to use the funds or allow you to carry over a certain amount into the following year. If your employment is terminated, you will typically have 90 days to submit claims for expenses incurred during your employment.
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If you have a Health Savings Account (HSA), you retain ownership and access
It is important to note that you can no longer make contributions to your HSA unless you are enrolled in another HSA-eligible High-Deductible Health Plan (HDHP). HSAs are only available to those with a qualifying health plan, and you are eligible if you have an HDHP. Therefore, if you lose your job and no longer have an HDHP, you cannot make new contributions to your HSA, but you can still use the funds already in your account.
Additionally, as with 401(k) retirement accounts, you can use the funds in your HSA to cover healthcare premiums with tax-free money. This is because contributions to an HSA are made with pre-tax dollars, and no tax is levied on contributions, the HSA's earnings, or distributions used to pay for qualified medical expenses. This can result in significant tax savings, allowing you to save an average of 30% on qualified medical expenses.
It is worth mentioning that the money in your HSA can also be invested. You can invest in mutual funds tax-free, and the funds never expire. This allows you to grow your HSA balance over time and potentially increase your savings for future medical expenses.
In summary, while losing your job may impact your ability to contribute to your HSA, you will still retain ownership and access to the funds in your account. You can continue to use these funds to pay for qualified medical expenses, and the tax advantages and investment options associated with HSAs can help maximize your savings.
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Frequently asked questions
Losing your job is a qualifying life event, so you have access to a marketplace plan regardless of when you’re laid off. You can also keep your current health insurance benefits through the end of the month. If you've been contributing to a health savings account (HSA), you will still have access to it, and you can use it to cover healthcare premiums with tax-free money. Depending on your state, you may be eligible for Medicaid.
COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act. It allows you to maintain your current health insurance for 18 to 36 months, depending on the qualifying event. You will have to pay 100% of the costs of the plan, but you will be able to keep your current doctors and covered prescriptions.
When shopping for new insurance plans, you will want to know whether picking one insurance plan over another will force you to change medical providers. It’s a good idea to call your doctors to find out whether they accept the new plans you are considering. You may need to prove that you lost health insurance through your job when applying for a new plan.
