If possible, ask your human resources department or check your policy documentation to find out how long you have health insurance after your last day of work.
What Is COBRA?
The Consolidated Omnibus Budget Reconciliation Act, or COBRA, allows you to continue your current employer-provided health insurance for a certain amount of time if you’ve been laid off, lose hours, change jobs, and a few other circumstances. However, your premiums will likely be more expensive than what you were paying when you were employed, because your employer typically pays for a certain portion of your premiums.
Pros
Keep your current plan: COBRA lets you keep your current plan—if eligible—exactly the same, with the same services and features.Decent term length: Depending on your plan, regulations allow you to keep your COBRA coverage for 18 or 36 months.
Cons
Expensive choice: You’re on the hook for up to 102% of the plan cost, which may be more than you can afford to pay if you aren’t working or are working fewer hours.Exclusive eligibility: To be considered for COBRA, you must have an eligible plan and be a qualified beneficiary of a qualified event, like you lost your job or had your hours reduced. Also, federal employees and certain religious organizations are not eligible.
What Are Health Insurance Marketplace Plans?
The Affordable Care Act (ACA), enacted in 2010, expanded public health insurance so that individuals and families can get health care that covers 10 basic services, including pregnancy care and prescriptions. Sometimes referred to as “Obamacare,” the ACA established the health insurance marketplace to browse options based on where you live and the coverage you’re looking for. Plans are separated into four tiers based on how much your insurance company will pay for medical services:
Platinum: Insurance pays 90% of costs, on average.Gold: Insurance pays 80% of costs, on average.Silver: Insurance pays 70% of costs, on average.Bronze: Insurance pays 60% of costs, on average.
The government subsidizes a portion of your premiums (via a “premium tax credit”) if your yearly income is 100% to 400% of the federal poverty level. If your income is greater than 400% of the federal poverty line, you may still qualify for some tax credit through the end of 2025, thanks to the passage of the Inflation Reduction Act.
Pros
Expanded Medicaid eligibility: If you live in a state with Medicaid expansion for low-income households, health insurance marketplace plans cover adults with income below 138% of the poverty level. However, if you’re eligible for Medicaid, you’re no longer eligible for tax credits or savings on out-of-pocket expenses under health care marketplace plans.Tax credits for low-income households: Premium tax credits are available to reduce monthly payments to your insurance company. If your income goes down, you may qualify for a higher tax credit.Layoffs grant a special enrollment period: If you lost your health coverage because of a layoff or job loss (or expect to soon), you can sign up for health insurance through a special enrollment period (SEP). Use after or instead of COBRA: If your COBRA coverage is running out or your COBRA plan costs change, you may qualify for a special enrollment period. However, if you end your COBRA coverage early, you do not have access to the special enrollment period and will have to wait until the next Open Enrollment.
Cons
Limited network depending on the plan: In 2022, nine states and the District of Columbia offered either one or two insurance providers. As such, you may have to choose between a cheaper plan with a limited network over a more expensive plan with a bigger network.
What Is Short-Term Health Insurance?
Short-term health insurance is a type of insurance plan that provides temporary medical insurance during “in-between” stages, like if you’ve been laid off from your job and lost your coverage but don’t yet qualify for a new workplace health insurance plan. Short-term plans provide coverage for less than 12 months, but may be renewed for a duration no longer than 36 months in total. These are different from health insurance marketplace plans, which have certain standards and minimum requirements that must be met to be on the exchange, like maternity care and preexisting condition coverage. Short-term health insurance plans are not required to meet federal health insurance standards.
Pros
Immediate coverage: You can secure health insurance quickly and often don’t see a gap between your old insurance and short-term coverage.Cancel whenever: If you find a new plan elsewhere, such as through a new job, you can cancel your insurance anytime without facing a penalty.
Cons
Potentially high cost: Since short-term health insurance isn’t required to meet the same minimum requirements of the ACA, you could pay full out-of-pocket costs for some services that would otherwise be free.Lack of services: Short-term health insurance doesn’t have the same stringent standards that ACA plans do, which means you’re not getting full health care coverage, whether you immediately need it or not.Approval based on health: If you have preexisting conditions, you may not be approved for coverage. Many short-term plans request a questionnaire to be completed when applying, and your health could mean you get denied.Not available in every state: As of 2020, 12 states have effectively banned short-term plans, and 13 states and the District of Columbia have limited them to three months without renewal.
How To Choose Between COBRA, ACA, and Short-Term Insurance
Going through a layoff is hard enough, but you’ll need to go through your health insurance options to pick the best one for you right now. For most people, ACA plans are usually the right fit during special enrollment periods. They have extensive coverage and can serve as a relatively comprehensive stopgap until you get a new plan through your new employer. But you may have certain circumstances that require different plans.
You Like (and Can Afford) Your Current Plan: COBRA
If you lost your job but have a solid severance package or are otherwise well-off, consider keeping your old plan until your COBRA coverage ends or you find a new job that offers health insurance. While you’re on the hook for the cost your employer used to pay, it might be worth it to keep what you have as long as you can.
You Have Preexisting Conditions: COBRA or ACA
If you have chronic health issues, you may want to keep your current plan under COBRA as long as you can until you find a long-term option. If you have preexisting conditions, including pregnancy, an ACA plan might be a better option.
You Missed the ACA Special Enrollment Period: ACA the Following Month or Short-Term Insurance
In prior years, missing the special enrollment window could prove to be extremely challenging as you would then have to find a stopgap measure till you qualified for insurance elsewhere. If you don’t qualify for the SEP and have exhausted all your other options, you may consider short-term health insurance until you qualify for a traditional health insurance plan somewhere else.
