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What Happens To My Health Insurance If I Quit My Job?

What Happens To My Health Insurance If I Quit My Job? | Very Good Coverage

It's legally mandated to have insurance today. However, quitting your job can draw up a few questions. Would you still have insurance? Could you continue on your previous plan?

You can expect to gain precise information on the steps to take after quitting your job. You will also learn what your options for health insurance are, what COBRA means for you and how long COBRA coverage lasts.

When you quit your job you can apply for COBRA insurance. It provides an extension of your former employer-sponsored health insurance plan to ensure you are never out of coverage. It generally lasts for 18 months and there are also state COBRA insurance policies to choose from.

The information in this article can be trusted as its source material is gained from a variety of reputable sources such as the US Department of Labor, various state Department of Insurance portals, and the Small Business Administration.

What To Do After Quitting Your Job

When you quit your job, you can temporarily continue your employer-sponsored insurance plan thanks to a federal law known as COBRA. Some adjustments take place, however. You end up paying the cost of your health insurance coverage, as well as a maximum of 2% for added administrative costs. This can be quite the shocker if you have been used to your employer paying your coverage's premium.

What is COBRA insurance?

About 20 years ago, Congress passed the COBRA bill, which stands for Consolidated Omnibus Reconciliation Act. The major aim was to provide families with some form of insurance safety net. Before the bill was passed, individuals that lost their health insurance when they quit their jobs or got fired had to find inexpensive individual insurance, quite a difficult feat.

There were times when getting insurance was impossible, particularly with individuals that had pre-existing conditions such as heart disease and diabetes. People had two options, either face exorbitant premiums or get turned down.

When COBRA was finally passed, it allowed individuals to extend their previous employer's health insurance policy. They could benefit from the same coverage even though they were responsible for paying the coverage fees, rather than their former employers.

Your employer may decide to establish a COBRA group health plan instead of maintaining your previous plan. However, the COBRA group plan will cover inpatient and outpatient care, physician visits and prescription drugs, and visual and dental care and surgeries. It does not cover life insurance, nor does it include disability benefits. COBRA also covers a former employee's partner or dependent children.

If you work for a private company, the Employee Retiree Income Security Act (ERISA) ensures that your employer complies with the basic rules of COBRA. So, you can't be cheated or added to a plan that doesn't cater to your basic health needs. While your COBRA coverage is in effect, you can search for a befitting health insurance plan before the end of the COBRA coverage.

Who Is Eligible to Receive COBRA Health Insurance?

You can get COBRA for your family and yourself if the only other option would be to lose coverage. If the following happens to you, you can claim COBRA:

  • You were fired; the reason was not gross misconduct
  • You quit your job
  • Your working hours were reduced

How Long Does COBRA Insurance Last?

You can continue your previous employer's insurance coverage for a maximum of 18 months through COBRA. Nevertheless, in some cases, your dependents and spouse can remain covered for a maximum of 3 years.

It is important to note that you have to be covered by your employer plan when you quit your job. If you aren't, then you cannot be eligible for COBRA.

COBRA applies to local and state government employees and private companies that have a minimum of 20 employees.  You can cancel COBRA at any time. This is because you are not typically locked into the year and a half commitment during sign up.

The coverage can end when the following milestones are reached:

  • Stop paying premiums
  • Get to the end of your coverage period
  • Become Medicare eligible.

COBRA coverage can also end if the previous employer:

  • Stops providing health insurance to its workers
  • Winds down operations

If the employer switches health plans, you can be moved to the new plan as well. It isn't possible to remain on the old plan.

Some cases may be considered for continuing COBRA coverage of the former employee's child, especially if they cause the dependent and partner to lose coverage. These cases include the death of the covered individual, separation from a partner, a child losing dependent status, or the individual's eligibility for Medicare.

The COBRA coverage period may also be extended in certain events, part of which have been listed above. If one of the beneficiaries becomes disabled during that period, an extension may also be considered for that individual.

How Can I Apply For COBRA?

Your employer has to notify your health insurance provider within a month of you quitting your job. This then prompts the provider to send you additional information on how you can extend your health insurance coverage with COBRA.

How Much Do I Have To Pay For COBRA?

You are required to pay the entire cost of your health insurance policy and an administrative fee that could be up to 2% of the entire cost. What you pay varies depending on the cost of the plan your previous employer bargained for.

On average, the yearly costs for employer-sponsored health insurance stands at over $22,000. Generally, employers pay over half of the premium costs.

However, a COBRA plan means that you, the former employee, have to shoulder all the costs. This might mean playing more than twice your monthly contribution for coverage premiums when you had a job.

Do States Have COBRA Laws?

Most states have some form of COBRA law for individuals employed by SMEs. These 'mini' COBRA laws deal with former employees of businesses that do not have up to 20 staff. These state laws aim to offer COBRA insurance to former employees just as the federal version does. However, the eligibility period varies:

  • 16 states provide mini COBRA coverage for a year and a half (18 months)
  • California and New York provide mini COBRA coverage for three years
  • Connecticut offers its residents mini COBRA coverage for two and a half years

It isn't every state in the union that offers mini COBRA plans. The states below tend to have a limited scope of eligibility:

  • North Dakota provides mini COBRA coverage for just 39 days
  • Oklahoma offers mini COBRA coverage for 63 days
  • Tennessee, Hawaii, and Georgia provide mini COBRA coverage for only three months

Some states also provide scope for expanded eligibility in certain instances:

  • Florida provides 11 additional months of coverage for disabled persons
  • Illinois lets spouses of employees aged 55 and up maintain COBRA coverage till they become Medicare eligible. However, this comes with a hefty 20% administration fee.
  • North Dakota extends mini COBRA coverage for persons involved in a divorce to 36 months
  • Massachusetts extends mini COBRA coverage to 30 months if the persons involved are disabled. It also extends it to the same amount of time for dependents should the employee die.
  • Oklahoma provides six additional months of coverage for persons that require surgery or are pregnant.

This shows that the state laws vary widely, and that is why it is important to check with the Department of Insurance in your state to know the specifics of its mini COBRA laws.

Alternatives to COBRA

If you've just quit your job or lost it, you may very well be eligible for COBRA, but this may affect your finances. The ACA or Affordable Care Act also provides more options to select from.

The ACA created health insurance marketplaces or exchanges that enable individuals to shop for an individual health insurance plan. You may consider shopping for a cheaper plan than what your previous job provided.

Once you lose your job, you may qualify for a 30-day Special Enrollment Period, so you do not have to wait until the next Open Enrollment Period to get a new insurance plan.

Another alternative is to check if you qualify for Medicaid or consider getting on your partner's health insurance plan if possible.

About THE AUTHOR

Greg McKnight

Read more about Greg McKnight

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