By Brenda L. Peterson, The Layoff Lady
When your “day job ends”, many things in your financial life change. For one, what is for many people their core source of income, ends. This often prompts a quick shift to a short-term survival mindset that will last from the layoff event until the first paycheck from that new job arrives.
Let's talk about how to manage your healthcare during this time. Note that I’ll outline options first, and then you can review all of the links at the end of this article for additional information. Brace yourself—there is a lot going on here.
Disclaimer: (You know there has to be one of these now that we're talking about topics like personal finances and health insurance.)
While I know quite a bit based on my previous work experience supporting financial coaches, my own research, and my personal life experiences, I do not currently hold a license or certification to give financial advice. The information provided here is educational information provided as guidance.
I hope you glean value from my lessons learned. Feel free to take my recommendations or not—but whatever you do, double-check my facts (and everyone's facts, for that matter). This is your life, and you will care more about your finances and health care than anyone else does. With that, read on.
Healthcare Coverage While Employed
In the United States, where health insurance for many people is part of an employer-provided benefits package, thinking through the health insurance implications of a job change is critically important. While working, you have limited health care coverage options through your employer. You make your selection when you first start, and after that, once a year. In most cases, your employer pays for part of it, facilitates the payment for your health care coverage, and even allows you to set up and use a Health Savings Account (HSA) as a separate benefit.
Healthcare Coverage Options After a Layoff
After you are laid off, your former employer will let you know when your benefits end. It may be as soon as your separation date, the end of the calendar month, or some other date altogether depending on your organization. If you have the time and ability to do so, it may be a good idea to fit in any doctor's appointments you have been putting off while you still have coverage.
Once your employer-sponsored coverage ends, there are many options for healthcare coverage. You'll also need to take steps to enroll in whatever coverage you choose. Most of these options have an associated monthly premium, and some are more cost-effective than others. Here are a few possibilities for your consideration.
Your Severance Package and Continued Benefits
If you do receive a sewerage package, you may also receive continued healthcare coverage for a specified period of time. You may get health care coverage included for a bit. This could be the company paying for the benefits you had before, or an amount of money that is earmarked to pay for healthcare coverage. These are two very different propositions.
If the company continues to pay for your health benefits, your coverage will work as before with your same coverage levels and networks. However, if you receive money to pay for health care coverage, you will need to decide what to purchase, enroll, then pay for it as billed.
COBRA Continuation Coverage
COBRA stands for Consolidated Omnibus Budget Reconciliation Act. In short, this provision allows former employees to pay the total cost of their formerly work-sponsored health insurance on their own. If you choose this option, you can keep this coverage for up to 18 or 36 months. As part of your layoff paperwork, your now former company will send you information about the logistics and cost of keeping this coverage and let you know your deadline for signing up (which is typically 60 days).
The good news? You can keep your same coverage. The bad news? The cost may knock you back. Now, you'll pay the total price for your coverage instead of your employer helping offset the cause. For example, while working, you may have spent $500 a month for your family’s healthcare coverage, and with COBRA, you will now likely pay thousands of dollars a month for that same coverage.
A Dependent on Someone Else's Employer Plan
Depending on your age and personal situation, you may have the option to be added to someone else’s employer-sponsored healthcare coverage. Here are two common scenarios:
In general, if your former employer’s plan covered you, your family member's plan will allow you to enroll in their plan, even mid-year. Be sure to check with your family member's employer to see if being added to their plan is a good option for you.
Remember, if you are added to your family member's health insurance plan, the additional costs for whoever is footing the bill can vary from “no big deal” to “holy crap, that’s an extra [whole lotta money] a paycheck!”
Healthcare.gov: The Marketplace
Since the Affordable Care Act (ACA—also nicknamed “Obamacare”), additional healthcare coverage options have been available outside employer-sponsored coverage. To find out what health insurance options are available, your eligibility, and any amount of help (in the form of a subsidy) you might qualify for, check out Healthcare.gov, also referred to as “The Marketplace.” Alternatively, some states have their own healthcare-specific website, like MNsure.gov in Minnesota. Regardless of if your state uses the national site or their own, this is the go-to place to find out about possible healthcare options that comply with ACA standards, meaning that they include a base level of coverage (like preventative health screenings, emergency services, pregnancy, etc.).
Many of these plans are High Deductible Health Plans (HDHP), and the higher the deductible, the lower your monthly premium, but the higher the possible out-of-pocket expense you will have. As with other high deductible plans, you can save money in a separate Health Savings Account (HSA) to help cover those expenses. However, Healthcare.gov does not have the option to help you set up an HSA account, so you’ll have to seek that out elsewhere if you are interested in setting that up.
One significant benefit of looking here is the possibility of getting a subsidy. A subsidy will help offset your healthcare cost and is usually applied before any premium you would need to pay every month. Typically, subsidies are calculated based on your projected income for the year, depend on how much money your household is bringing in, and may vary by state. You would need to enroll in an ACA plan within 60 days of being laid off.
Overall, Healthcare.gov can be a lot to juggle—but they do have help available in the form of agents, brokers, or assisters.
Short Term Health Insurance
Short Term health insurance is just that—lower-cost insurance intended to help you bridge the gap between employer-sponsored coverage. Typically, these don’t have preventative benefits (like annual physicals or flu shots covered), but they are significantly less expensive. In addition, this kind of coverage ensures that if something big happens, like an accident where you end up in the hospital, you won’t go broke paying for all those costs.
For example, during one period of unemployment, I bought short-term health insurance coverage for my daughter (for a tumultuous month where for a moment, it looked like all of my daughter’s parental units would manage to be out of work all at once). It was under $100 and ensured she had at least some coverage as we figured out the details of her longer-term healthcare coverage.
There are several other options to help pay for healthcare costs varying from good ideas to decidedly bad ones. For example, you could buy a private health insurance plan, take part in Medicaid/Medical assistance based on your financial situation, explore a community health share program, visit community health centers, use telehealth, rely on Minute Clinic, use a healthcare-specific credit card, and/or use discount cards to minimize prescription costs.
When it comes down to it, consider the short and long-term implications of your healthcare coverage decisions (including the possible financial hardship of having a significant medical diagnosis or expense without being insured) before choosing your course of action.
7-time layoff survivor Brenda L. Peterson, The Layoff Lady, waxes poetic on layoffs, job transitions, & career resilience.
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