Insurance options after a lay-off

Fellow Juicer Cain has had a bad week and raises a good question:

So, I just got laid off and my insurance ends in June. Any suggestions on how to get into a new health insurance plan pronto?

Really good question and there are a few options. My first recommendation after yelling at the sky and then getting a cookie (how I dealt with the first 10 minutes of getting laid off in 2009), is to talk to either a broker, an agent or a certified assistance counselor at some point in the next week or two. But here are the basic options:

Go naked
The upside is no premiums. The downside is a lot of risk in case something does go wrong. Meteors happen.

Go underwritten
If someone can pass underwriting, low premiums offer some protection. These plans will become more common in the very near future. The challenge is reading the fine print well enough to make sure that the coverage is actually useful coverage. This includes the Health Sharing Ministries.

COBRA
COBRA allows someone to pay 102% of the premium to hold onto their employer sponsored coverage. Cost sharing is rolled over so you don’t restart paying your deductible. The upside is the transition is smooth as you keep the same exact plan you currently have. The downside is that this is extremely expensive. COBRA may be a good idea for people with significant medical expenses already incurred and expect to incur high expenses in the near future. COBRA, as part of an ERISA plan, is pure community rated. A 21 year old pays the same premium as a similarly situated 64 year old.
An individual losing coverage will receive a COBRA eligibility letter within two weeks of the triggering event. They have two months to elect coverage by paying premiums that retroactively initiate coverage to the date of coverage loss. This is a bit of a one way option where if someone gets a new job with coverage forty five days after the initial loss of coverage, they can effectively be covered by COBRA’s retro-activity provision without actually paying a premium.

ACA Exchange
Job loss and loss of insurance because of a job loss is Qualifying Life Event for the ACA Exchanges. Within 30 days of the triggering event (loss of insurance), you can go on the Exchange and buy a new policy. Depending on your income and family situation, you may be subsidized. Make sure you estimate your annual income as the income from the previous job, any unemployment benefits and some income from a future job so that you don’t get hit with a massive subsidy repayment next year. Out of pocket expenses start off at zero. ACA policies price at a 3:1 ratio for age. Older people will pay more if they don’t buy a plan that is underneath the bench or don’t qualify for subsidies.

ACA plans are probably a better choice for people in good health with little chance of medical expenses for the rest of the year. They are also probably a better choice than COBRA for younger people (<~45ish) than older people due to the age premium ratchet.

Now let’s see if we can help Cain and the rest of the Jackels who are or will soon be looking for work to find work.

34 replies
  1. 1
    Evan T says:

    Or if they are healthy just do a short term major medical. Cheap and provides coverage for a hospital. Chrisitian Health Ministries???

  2. 2

    @Evan T: That is under the option of “Go Underwritten”

  3. 3
    Ohio Mom says:

    Aw crap, Cain.

    Do I remember correctly that you moved someplace new for the job? Now you can move someplace else I guess.

  4. 4
    Crashman says:

    Have you gotten a severance package? When I got laid off a few years ago they offered a few months of COBRA coverage for free. Luckily I was already covered under my spouse’s plan, so I negotiated with them to convert it into cash.

  5. 5
    Central Planning says:

    Create a DBA for yourself and then leverage insurance through your local chamber of commerce. I did that years ago and, while it was expensive, it was much less than buying insurance as an individual.

  6. 6
    Barbara says:

    @Central Planning: As expensive as the current plan might be, I bet it would be cheaper than an association plan, unless that plan is much less generous. But the main thing a basically healthy person transitioning between jobs needs is catastrophic coverage.

  7. 7
    Butch says:

    There’s a two-week requirement for COBRA? I didn’t receive that notification for several months after I was laid off.

  8. 8
    Barbara says:

    @Butch: The rules for COBRA are wickedly complex. You are supposed to make your premium payments within 30 days, but you are owed a 45 day grace period. I am paying COBRA for my daughter right now and I made a payment for February, March and April at the end of March. We thought she would buy off the exchange at first, and then we realized that she would be moving to a different state, and that just seemed like too much disruption. It’s expensive but not as much as we thought it would be.

  9. 9
    NJDave says:

    We used COBRA when my wife retired to keep the generous coverage that her employer provided. We then switched to an ACA plan whose premiums are 63% higher while only covering 3 out of the 4 of us. (Son is living independently and files separate taxes. He’s on Medicaid.)

  10. 10
    NJDave says:

    @Barbara: Also, it’s a month-by-month program. That is, every month the COBRA administrator sends to the insurance company a list of those eligible. Twice, in our experience, there were technical problems preventing our eligibility from being confirmed. Leading to denial of coverage for those months until we got it straightened out. We got coverage retroactively, but what an unnecessary PITA.

  11. 11
    Sab says:

    I work for a small employer. COBRA only applies if there are fifty employees. Doesn’t apply for me.

  12. 12
    Barbara says:

    @Sab: I am pretty sure the minimum size for COBRA coverage is 20, not 50 unless the law has changed. Quick search suggests 20 is still in place.

    Here is a link for the states that provide continuation coverage for employers as well, frequently picking up those that COBRA misses: https://acadiabenefits.com/blog/wp-content/uploads/2016/08/State-Guide-to-COBRA-Supplemental-Requirements.pdf

    P.S. You might be mixing up COBRA eligibility with the definition of a small group under HIPAA continuation provisions. A small group is one with at least two and 50 or fewer employees during the course of any quarter in a year (I think that’s it). COBRA kicks in for employers with 20 or more employees during some prescribed period of time.

  13. 13
    Barbara says:

    @NJDave: Yep. If you can, the best way to do this is to pay two months at a time and put the due date on your calendar. Blessedly, I can pay the premiums on-line so I can verify pretty much immediately that a transfer has taken place.

  14. 14
    cain says:

    @Ohio Mom:

    Do I remember correctly that you moved someplace new for the job? Now you can move someplace else I guess.

    Yep, I moved to Denver for that. I only stayed in the job for 8 months and then got promptly laid off. COBRA is really expensive at $500 a month. I’m not sure I can sustain that for even a short term, it would put a lot of pressure on my finances.

    I’m off looking for another adventure and hopefully it won’t take 14 months like last time. :(

  15. 15
    cain says:

    @Crashman:

    Have you gotten a severance package? When I got laid off a few years ago they offered a few months of COBRA coverage for free. Luckily I was already covered under my spouse’s plan, so I negotiated with them to convert it into cash.

    I got a severance package of 3 months, but it didn’t include health insurance. My health insurance expirs first of June.

  16. 16
    cain says:

    @Barbara:

    Have you gotten a severance package? When I got laid off a few years ago they offered a few months of COBRA coverage for free. Luckily I was already covered under my spouse’s plan, so I negotiated with them to convert it into cash.

    Oh, is that something I should keep in mind? I’ll probably move back to the Northwest since I don’t know anybody in Denver. And your co-workers treat you weird if you’ve been laid off. Not there long enough to really override whatever survivors guilt or whatever they go through.

  17. 17
    Butch says:

    @Barbara: Barbara, I was referencing this sentence in the post:
    An individual losing coverage will receive a COBRA eligibility letter within two weeks of the triggering event.
    I didn’t get this notice for something like four months after I was laid off, long after I had found another job. I guess I should slow down when I comment; the point I was trying to make (and obviously didn’t) was that if you’re thinking about Cobra it’s probably a good idea to be proactive about contacting the previous employer for information because I don’t think they’re real good about observing that two-week deadline.

  18. 18
    Mart says:

    Great information. At sixty with wife recovering from breast cancer, no good options if laid off. Funny how my Repub peers and me can’t wait to get to age 65 to qualify for that hated government healthcare…

  19. 19
    cain says:

    @Sab:

    I work for a small employer. COBRA only applies if there are fifty employees. Doesn’t apply for me.

    So the company I got laid off at has 23 employees, and I still have COBRA coverage. So I think Barbara is right that it is 20 or higher not 50 as you say just from my experience.

  20. 20
    Barbara says:

    @Butch: Absolutely. The deadlines in COBRA get messed up continually. Asking your employer for information is reasonable, but asking the insurer can also be the way to go. The problem is that the insurer has to know from the employer who might be eligible.

  21. 21
    Crashman says:

    @cain: Damn, sorry to hear that. Such a messed up system. Good luck; you’ll find something!

  22. 22
    Sab says:

    @cain: Thanks. Useful info.

  23. 23
    Seanly says:

    COBRA can be pretty expensive. Many of us corporate drones don’t realize how much of our coverage is paid by our employer. I quit one job and got a notice about COBRA which said the cost would be $1100 a month. Maybe that big expense was inflated for first month or something, but I had no lapse in coverage so stopped reading at that point.
    When I was let go from another employer, my wife’s company allowed us to sign onto their plan. Being a small company the plan wasn’t great but we just needed coverage until I found a new job.
    Good luck to the juicer who lost his/her job.

  24. 24
    tom says:

    My experience in 2016 was that COBRA for me (single, age 60) was a bit over $1100/month. I went on the ACA exchange in 2017 and the premium for a Sliver plan in Michigan was $880/month.

    My former employer used some service company to handle my COBRA payments, but they screwed something up and the insurer canceled my coverage. I only found out about this three months after I started making my payments when I went to get an Rx filled and the cost went from $10 to >$200. It took two weeks of daily phone calls between me, the service company, and the insurer to straighten it out.

  25. 25
    Belafon says:

    Forget meteors, last weekend I twisted my ankle hard enough I broke my fibula.

  26. 26
    Brachiator says:

    @cain: Good luck to you. I’ve gone through a couple of layoffs, and it is not fun.

    During one layoff, I had COBRA for a while, but had to drop it because of the cost. I got lucky and did not have any significant health problems while looking for a new job.

  27. 27
    Mnemosyne says:

    @Butch:

    I think that when my husband was laid off, the COBRA information was included in his exit papers, but that may have been because it was part of his severance package.

    Cain, I think that these days an Exchange policy is going to be less expensive than COBRA, especially if you’re going to move again. It’s probably worth sending out at least a few resumes in Denver — you should email TaMara and see if she has any leads.

  28. 28
    Travis says:

    “Go naked”: if you have any net worth, or ever plan to acquire net worth, don’t do this. My otherwise healthy wife was diagnosed with a spinal tumor this month, with surgery next week. We’re now looking at $100k, all but 6k deductible covered by her ACA bronze plan.

  29. 29
    Butch says:

    @Mnemosyne: I received the exit papers months later, too. The company had been taken over by a larger firm that immediately started a race to the bottom (and to my immense satisfaction is now facing legal issues for falsifying data at an environmental cleanup site) and didn’t bother with things like employee relations.

  30. 30
    Mnemosyne says:

    @Butch:

    Whoa. Can I ask what state that was in? California has decent worker protections (and it’s the only state I’ve ever been laid off in), so I would be shocked to hear that it was here. I know other states don’t care as much about that stuff.

  31. 31
    Ohio Mom says:

    @Travis: Yikes — spinal surgery. Hope it goes well and hope that you’ll have the support you need, starting with someone to keep you company in the waiting room.

    I think it took us about three months to get back on an even keel after my husband’s heart valve replacement. A lot of everyday stuff falls by the wayside and then there is all the catching up. Cut yourself a lot of slack is my advice.

  32. 32
    JGabriel says:

    David Anderson @ Top:

    COBRA allows someone to pay 102% of the premium to hold onto their employer sponsored coverage. Cost sharing is rolled over so you don’t restart paying your deductible. The upside is the transition is smooth as you keep the same exact plan you currently have. The downside is that this is extremely expensive.

    How good or bad an idea would it be to make COBRA plans eligible for Exchange subsidies for a limited period? I’m thinking either for the standard current COBRA eligibility period, or maybe extending the COBRA period such that people could keep their plans until the next open enrollment period, or perhaps the next open enrollment period of the following year.

  33. 33
    El Cruzado says:

    Hey thanks I’m in pretty much the same situation and this was extremely helpful.

    Particularly I didn’t know that ACA plans were only considered for 30 days, If my current interviews don’t pan out I’ll need to run get one of those as it’s likely to be far cheaper than COBRA (nearly 2k a month to cover me and my wife, two mostly healthy 40-somethings).

  34. 34
    El Cruzado says:

    @JGabriel: It doesn’t look like they thought that out fully when they wrote the laws and regulations. In my case for example I have until July 7 to sign up to COBRA but only until May 25 to sign up to ACA.

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