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What Are Your Health Insurance Options if You’re Unemployed?

Life happens. We get that. If you lost your job, we know you’re not just worried about when your next paycheck will arrive, there’s also that other nagging thought in the back of your mind: What about my health insurance?

If you’re no longer covered by your employer’s group health insurance, you might be assuming that your health care options are limited. And now it may feel like all you can think about is how to get health insurance between jobs.

But don’t lose hope. Take a deep breath. There are options out there to protect your health care until you’re back on your feet!

What Is the Best Health Insurance for Unemployed People?

We won’t sugarcoat it—being without health coverage is never a good feeling. But there is some good news here. Even if you’re currently unemployed, you do have health insurance options. Here’s a basic list:

We’ll walk you through each one of them.

Short-Term Health Insurance

Short-term health insurance (aka temporary or limited-term health insurance) is health insurance with a limited duration―typically 30 to 90 days. It’s mostly used to cover health emergencies and lapses in coverage.

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For example, suppose you're leaving your job and not starting a new one for a few months. Or maybe you retired early and need coverage until you’re old enough to qualify for Medicare benefits.

Regardless of the reason, remember that short-term health insurance isn't guaranteed. You have to qualify by submitting a health care questionnaire to the insurance provider and disclosing any preexisting conditions that could disqualify you from coverage.

Unlike major medical insurance policies, short-term coverage is limited. It does cover some inpatient and outpatient procedures, emergency room visits and intensive care costs. But it won’t cover some of the essential stuff like pregnancy and maternity care, mental health, preventative care, or—like we mentioned above—preexisting conditions.

You’ll want to consider that short-term policy deductibles and out-of-pocket expenses tend to be more expensive than comprehensive plans. On the other hand, premiums are usually affordable and coverage can potentially start within 24 hours.

Each plan’s coverage and costs are different, so read the details of your plan to see what’s covered before signing on the dotted line.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Yeah, that’s a mouthful. No wonder we just call it COBRA. To put it simply, COBRA gives you the chance to extend your employer-based coverage for a limited period of time after you’ve stopped working for them. Big sigh of relief, right? Here are some of the upsides and downsides:

Advantages of COBRA

The good thing about COBRA is that it makes it mandatory under federal law for an employer to allow employees to pay to stay on their health care 18 months after they’ve left their job. This can also stretch to 36 months if you qualify.

Disadvantages of COBRA

The not-so-great thing about COBRA is that it does mean you’ll pay the full cost of the health insurance premium yourself. You’ll pay more than what you saw coming out of your paycheck when you were employed because your employer was subsidizing (aka paying for!) a percentage of that health care premium.

Now, if this is going to break the bank, don’t worry! You can buy individual ACA health insurance instead (we’ll explain that too). But it’s always a good idea to speak to your employer before or as soon as you leave your job to get the lowdown on what your new COBRA premium might be. That way you have all your bases covered.

What Happens if You Change Your Mind About COBRA?

Everyone’s allowed to change their mind. Right? A couple of months of COBRA coverage might leave you thinking that it’s just too expensive. Or maybe you got another job sooner than you thought you would and don’t need it anymore. What now?

If you’re still without coverage and you want to leave COBRA, you can step away from it and use the Affordable Care Act (ACA) health insurance marketplace if you’re still in the open enrollment period (usually November and December)—we’ll get to that in a minute.

When you do decide on a health insurance plan to replace your employer plan, aim for a high deductible. If you’re not sure when your next job might come along but you need some good health coverage in the meantime, a high-deductible plan makes sense. Why? Because your monthly premiums will be low, and if you also have a health savings account (HSA) in place, you’ll save money on your taxes at the same time too.

But there’s also the option to qualify for marketplace coverage during a special enrollment period outside of open enrollment. For more on that, keep reading.

Marketplace Health Insurance

Now, regardless of your job status, you can buy a health insurance plan in the health care marketplace.

The ACA gives unemployed workers the chance to apply for health care during a special enrollment period. This time frame is 60 days after you lose your employer’s health insurance coverage. That’s a big deal if you just lost your job and have a family dependent on you for health care!

And speaking of family, when you do apply for new coverage, you’ll find out if you qualify for any savings on your premiums, tax credits or low-cost coverage through Medicaid or the Children’s Health Insurance Program (CHIP).

Medicaid

What’s Medicaid? The clue is in the name: Medicaid gives aid and assistance to people with disabilities, the elderly, pregnant women, children, and families on low incomes. It currently covers over 70 million Americans.1 It’s available in all states to people who qualify.

If you do qualify for Medicaid, how does it help? Well, it can reduce your monthly health insurance premiums and other costs like copayments, deductibles and out-of-pocket bills. Remember that Medicaid eligibility is based on the size of your household and your income—not your job situation.

How Low Does Income Need to Be to Qualify for Medicaid?

You might be wondering, Can I get free health insurance if I’m unemployed? The answer is that Medicaid is usually free. Although states can charge you a share of the cost, in most cases there aren't any premiums, deductibles or copays because Medicaid is designed to help low-income individuals and families.

Now you might also be thinking, How low would my income have to be to qualify? Medicaid income levels are based on the government’s federal poverty level (FPL). These are dollar levels the government sets as markers to see if you’re eligible for benefits including Medicaid.

Let’s look at an example: The poverty level for a single individual is an annual income of $12,880.2 If your income is currently between 100% and 400% of the individual FPL, you’ll qualify for tax credits that lower your monthly health insurance plan.

But what if (like many families) your total household income is too high to get Medicaid but too low to afford decent private insurance? There are still some other options for you to explore, and the good news here is your children may still qualify for a Medicaid program called CHIP. And another plus: CHIP enrollment is open year-round.

Medicare

Medicare, on the other hand, is different from Medicaid. It’s designed specifically to provide  hospital and medical care for people over the age of 65 and anyone under 65 who has received Social Security disability benefits for more than two years.

Medicare also covers those suffering from end-stage renal disease (kidney failure) and amyotrophic lateral sclerosis (known as ALS or Lou Gehrig's disease).3

If you qualify for Medicare, your coverage will be split into Part A (hospital costs) and Part B (medical costs) along with Part D for prescription drugs. And just to make things more confusing, there’s Medicare Advantage (known as Part C), which bundles them all.

Spouse’s or Parents’ Health Insurance Plan

We saved this option for last for a reason. Sometimes, being on your spouse’s plan isn’t the most cost-effective option in typical circumstances—that’s why you aren’t already on the same plan! And most people don’t actually want to put their health care burden on a parent. But let’s face it―it could be the right move for a season.

If you’re unemployed and married and your spouse has health insurance through their employer, you can be included on their policy in most cases. Or if you’re under 26 years old, you’re legally eligible to be included on your parents’ insurance policy.4

Will the 2021 Stimulus Bill Help With Health Insurance for the Unemployed?

COVID-19 is finally in the rearview mirror for many Americans and the American Rescue Plan comes with a few major health care perks. Essentially, it makes health insurance for unemployed individuals much more affordable. Let’s look at how it plays with COBRA and the ACA marketplace.

If you chose COBRA to get you through unemployment, the American Rescue Plan subsidizes COBRA premiums 100% for a limited time. It also extends the dates of COBRA coverage for individuals whose right to coverage previously ended. That can make a big difference if you’re in a tough spot. But remember—you have to be unemployed involuntarily to qualify for these perks.

If you chose to purchase a plan from the ACA marketplace, and you’re unemployed involuntarily, there’s more good news. The American Rescue Plan increases the size of the subsidy to help unemployed folks pay for ACA health care premiums. Depending on the size of your family and your yearly income, you might be eligible for more help.

Tips if You’re Unemployed and Need Health Care

It might be impossible to predict when your job could be coming to an end, but there are things you can do to keep yourself ahead of the game and have a backup plan if you suddenly find yourself out of work and out of health insurance.

1. Start to find new coverage as soon as possible.

Even before you leave a job, there’s nothing wrong with talking to those helpful folks in Human Resources about your health insurance benefits and what will happen to them if you leave. You’ll be able to find out how much COBRA coverage will cost you and use this info to decide whether to stick with COBRA or go it alone in the health insurance marketplace.

2. Have all your important details ready.

When you’re all set to talk COBRA or marketplace or even Medicaid, here’s the information you should have ready: your income, total household income, Social Security number, pay stubs, tax records, information about your current (or just ended) health insurance plan, and the number of dependents in your household.

3. Get advice from an independent insurance agent.

Not only will an independent insurance agent use the information we listed above to figure out the best insurance plan for your budget and needs, but guess what? They’re the ones in the know when it comes to your state’s laws too—because some states want you to apply for government-based insurance through the federal marketplace while others have a state-based marketplace and set their own levels of eligible income. Pretty confusing, huh? That’s why having an agent step in to make sense of it all is really helpful.

4. Keep your emergency fund full.

An emergency fund is a must no matter what your situation is in life! But it’s super important if you’re out of work and out of health insurance coverage. Your emergency fund takes away the worry of those unpredictable trips to the doctor and routine checkups that come with out-of-pocket costs. Having a fully funded emergency fund (3–6 months of expenses saved up) will give you the ability to pay for insurance during a gap period without all the stress.

Ease Your Health Insurance Worries With Help From an Expert

Here’s the truth: Trying to figure out your health insurance can be really overwhelming, especially if you’re unemployed. Why not take the stress out of it and let an independent insurance agent guide you? Having an agent step in to make sense of it all is really helpful.

Among other details, an independent agent will know your particular state’s laws vs. federal policies. Even better? They’ll be able to save you money by knowing how and when to apply the perks of the American Rescue Plan.

Ready for some good advice and peace of mind from trusted insurance experts in your area? Start the process today by talking with an Endorsed Local Provider (ELP).

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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