Many Americans under the age of 65 receive their health insurance through an employer. However, the drawback of having health insurance tied to a job is that losing your job also means losing your health insurance, adding stress to an already difficult situation.
The good news is that you have coverage options if you’ve lost your job and are facing the loss of your employer-sponsored health insurance.
Can I enroll in an ACA marketplace insurance plan as soon as I lose my job?
If you’ve lost your job-based health insurance—whether due to a layoff or other termination—you’ll likely be able to enroll in an ACA-compliant health insurance plan without experiencing a gap in coverage. The loss of employer-sponsored insurance qualifies you for a Special Enrollment Period (SEP).
Thanks to federal regulations that have expanded ACA subsidy eligibility to millions of consumers, it is now easier than ever to find subsidized marketplace coverage. You don’t have to wait for the next annual Open Enrollment Period to sign up.
How long is the Special Enrollment Period for ACA coverage?
Your Special Enrollment Period begins 60 days before your current plan ends. If you enroll before losing coverage, your new plan will take effect on the first day of the month after your old plan ends, ensuring continuous coverage if your old plan terminates at the end of the month.
The Special Enrollment Period also lasts for 60 days after your coverage ends. However, if you wait until after your old plan expires to enroll, there may be a gap in coverage, as your new plan will not apply retroactively.
If you find yourself in this situation, a short-term health insurance plan might be a good option to bridge the gap until your new plan begins. Short-term plans do not cover pre-existing conditions and are not regulated under the Affordable Care Act (ACA), but they can provide reasonable coverage for unexpected medical needs during a temporary period of being uninsured.
What if my income is too low for ACA subsidies?
To qualify for premium subsidies on a marketplace plan, you must:
- Not be eligible for Medicaid, premium-free Medicare Part A, or an employer-sponsored plan.
- Have an income of at least 100% of the federal poverty level (unless you are a recent immigrant).
In most states, the ACA’s Medicaid expansion provides coverage to adults with household incomes up to 138% of the poverty level, based on their current monthly income. If your income suddenly drops to $0, you’ll likely qualify for Medicaid and can transition to it when your job-based coverage ends.
However, 11 states have not expanded Medicaid, leaving many low-income adults in a coverage gap. People in these states who earn below the federal poverty level do not qualify for Medicaid or ACA subsidies. If you live in one of these states, there may be strategies to avoid the coverage gap.
Keep in mind that ACA subsidy eligibility is based on your total household income for the entire year. Even if your current monthly income is below the poverty level, you may still qualify for subsidies if you earned enough earlier in the year.
However, if you get a new job later in the year, your total annual income—including wages from the new job—will be counted. This could impact whether you need to repay some or all of the subsidies received while you were unemployed.
Should I use COBRA to continue my employer-sponsored coverage?
If you are eligible for COBRA continuation coverage, you can keep your employer-sponsored health insurance for up to 18 months. However, COBRA is usually expensive because you must pay the full cost of the plan, plus a 2% administrative fee (unless your employer offers a subsidy as part of a severance package).
You have 60 days to decide whether to elect COBRA coverage. During this time, you can use COBRA retroactively if you incur medical expenses before choosing coverage. This means that if you have a one-month gap between your employer plan ending and your new plan starting, you can elect COBRA if you end up needing medical care during that period. Your coverage will take effect as if it had never lapsed, as long as you pay all required COBRA premiums.
Your employer will notify you if COBRA (or state continuation coverage) is available and provide details on how to activate the extension, how long you can keep it, and the monthly cost.
If you choose COBRA initially but later want to switch to a marketplace plan, you will have a Special Enrollment Period when your COBRA coverage ends.
COBRA vs. ACA Marketplace Plans
Here are some key factors to consider when deciding between COBRA and an ACA marketplace plan:
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ACA subsidies: Subsidies are now available at all income levels, depending on the cost of coverage in your area. (The American Rescue Plan and Inflation Reduction Act removed the income cap for subsidies through 2025.) If your employer is not subsidizing your COBRA coverage, an ACA plan will likely have lower monthly premiums.
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Where to buy an ACA plan: If you are eligible for an ACA subsidy, you must purchase your plan through the official marketplace/exchange. Subsidies are not available if you buy coverage directly from an insurer.
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Out-of-pocket expenses: If you’ve already paid a significant amount in out-of-pocket costs under your employer-sponsored plan this year, switching to an individual/family plan means starting over with a new deductible and out-of-pocket maximum. Depending on your healthcare needs, this may outweigh the lower premiums of an ACA plan.
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Provider networks and drug coverage: If you have specific doctors or hospitals you want to continue using, check whether they are in-network for the ACA plans available in your area. Employer-sponsored and individual market plans can have different networks, even if they are offered by the same insurer. Also, review plan formularies to ensure that any necessary medications are covered.
Should I consider short-term health insurance if I’m losing my job?
In most cases, short-term health insurance is not the best option if you are losing employer-based coverage. As mentioned earlier, you will qualify for a Special Enrollment Period that allows you to transition to an ACA-compliant individual/family plan or another employer’s plan.
ACA-compliant plans provide more comprehensive coverage than most short-term plans, which do not have to follow ACA regulations. Additionally, many people qualify for subsidies that significantly reduce or eliminate their ACA plan premiums.
However, the ability to switch to an ACA plan after losing other coverage is time-sensitive. If you wait more than 60 days, you will lose your Special Enrollment Period and will have to wait until the next annual Open Enrollment Period to sign up for an ACA plan. In this case, a short-term plan may be your only option to remain insured until you can enroll in more comprehensive coverage.
Before opting for short-term insurance, check whether you qualify for Medicaid (which is available year-round) or a state-run program with more flexible enrollment rules. If no other options are available, a short-term plan can provide temporary coverage until the next Open Enrollment Period or until you obtain coverage from a new employer.