Most Americans under the age of 65 get their health insurance from an employer. But the downside to having health insurance linked to employment is that losing your job will also mean losing your health insurance, adding stress to an already stressful situation.
The good news is that you’ve got coverage options if you’ve lost your job and are facing the loss of your employer-sponsored health coverage.
Can I enroll in ACA marketplace insurance as soon as I’ve lost my job?
If you’ve lost your job-based health insurance – whether to layoff or other termination – you’ll likely be able to enroll in ACA-compliant health plan and not face a gap in coverage. The loss of your employer-sponsored coverage will make you eligible for a special enrollment period (SEP) due to the loss of your employer-sponsored health plan.
And thanks to federal legislation that extended ACA subsidy eligibility to millions of consumers, you’re more likely than ever to find marketplace coverage that’s subsidized – and you won’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 starts 60 days before your current plan ends. If you enroll prior to your coverage loss, your new plan will take effect the first of the month after your old plan ends, which means you’ll have seamless coverage if your old plan is ending on the last day of the month.
Your special enrollment period also continues for 60 days after your coverage loss, although you’d have a gap in coverage if you wait and enroll after your old plan ends, since your new plan wouldn’t take effect retroactively.
If you’re in that situation, you might find that a short-term health plan is a good option for bridging the gap until your new plan takes effect. Short-term plans won’t cover pre-existing conditions and are not regulated by the Affordable Care Act (ACA). But they can provide fairly good coverage for unexpected medical needs during a temporary window when you’d otherwise be uninsured.
What can I do if my income is too low for ACA subsidies?
In order to qualify for premium subsidies for a plan purchased in the marketplace, you must not be eligible for Medicaid, premium-free Medicare Part A, or an employer-sponsored plan – and your income has to be at least 100% of the federal poverty level (unless you’re a recent immigrant).
In most states, the ACA’s expansion of Medicaid eligibility provides coverage to adults with household income up to 138% of the poverty level, with eligibility determined based on current monthly income. So if your income has suddenly dropped to $0, you’ll likely be eligible for Medicaid and could transition to Medicaid when your job-based coverage ends.
Unfortunately, there are still 11 states where most adults face a coverage gap if their household income is below the federal poverty level. They aren’t eligible for premium subsidies in the marketplace, and also aren’t eligible for Medicaid. This is an unfortunate situation that those 11 states have created for their low-income residents. But there are strategies for avoiding the coverage gap if you’re in one of those states.
And keep in mind that subsidy eligibility in the marketplace is based on your household income for the whole year, even if your current monthly income is below the poverty level. So if you earned enough earlier in the year to be subsidy-eligible, you can enroll in a plan with subsidies based on that income, despite the fact that you might not earn anything else for the rest of the year.
But be aware that if you get rehired at a new job later in the year, the income from that job will be counted as part of your total income, and could affect whether you have to repay some or all of the subsidy that was paid on your behalf while you were between jobs.
Should I use COBRA to continue my employer-sponsored coverage?
If you’re eligible for COBRA continuation coverage, you’re allowed to maintain the group health insurance coverage you had while you were employed for up to 18 months. Those who choose COBRA are typically responsible for the full cost of premiums for their former employer’s plan, plus a 2% administrative fee (unless the employer offers a COBRA subsidy as part of a severance package).
If COBRA is available, you’ll have 60 days to decide whether you want to use COBRA to keep your group coverage in effect. You can use this 60-day window as a bit of a cushion between your employer coverage and your new coverage, because COBRA takes effect retroactively if and when you elect to use it.
So if you’ll have a one-month gap between your job plan ending and your new plan starting, you could elect COBRA if you end up with medical needs during that month. The coverage would seamlessly start when your old plan would have ended, avoiding any gap in coverage as long as you pay all COBRA premiums that are due.
If COBRA (or state continuation coverage) is available, your employer will notify you and give you information about what you’ll need to do to activate the coverage continuation, how long you can keep it, and how much you’ll have to pay each month to keep the coverage in force.
If you rely on COBRA after leaving your job (instead of transitioning to a self-purchased plan in the marketplace), you’ll have a special enrollment period when the COBRA subsidy ends. This will allow you to transition to an individual/family plan at that point if you want to.
Read more about eligibility for COBRA and its costs.
COBRA coverage vs individual-market health insurance
Here are a few considerations to keep in mind when you’re deciding whether it makes more sense to utilize COBRA or to purchase an ACA marketplace health plan:
Increased access to ACA subsidies. ACA marketplace 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 eliminated the income cap for subsidy eligibility through 2025. And the subsidies are substantial, covering the majority of the premium cost for the majority of marketplace enrollees.
Unless your employer is subsidizing your COBRA coverage, you’ll probably find that the monthly premiums are lower if you enroll in a plan through the marketplace, as opposed to continuing your employer-sponsored plan.
If you are eligible for an ACA subsidy, you’ll need to shop in your exchange/marketplace, as subsidies are not available if you buy your plan directly from an insurance company.
Out-of-pocket costs. Have you already spent a significant amount of money on out-of-pocket costs under your employer-sponsored plan this year? You’ll almost certainly be starting over at $0 if you switch to an individual/family plan, even if it’s offered by the same insurer that provides your employer-sponsored coverage.
Depending on the specifics of your situation, the money you’ve already paid for out-of-pocket medical expenses this year could offset the lower premiums you’re likely to see in the marketplace.
Coverage of your providers and/or medications. Do you have certain doctors or medical facilities you need to continue to use? You’ll want to carefully check the provider networks of the available individual/family plans to see if they’re in-network (provider networks can vary significantly between the employer-sponsored and individual market, even if the plans are offered by the same insurance company).
And if there are specific medications that you need, you’ll want to be sure they’re on the formularies of the plans you’re considering.
Should I consider short-term health insurance if I'm getting laid off and losing my health plan?
In most circumstances, short-term health coverage is probably not going to be your best option if you’re losing your health insurance due to a job loss. As described above, you’ll qualify for a special enrollment period that will let you enroll in other coverage, including an ACA-compliant individual/family plan, or another employer’s plan.
ACA-compliant plans are much more robust than most short-term health plans, due to the regulations they have to follow. And most people are eligible for subsidies that will cover some or all of the premiums for these plans.
But the opportunity to switch to an ACA-compliant plan after the loss of other coverage is time-limited. If you wait more than 60 days, you’ll find that you cannot sign up for private ACA-compliant coverage (unless it happens to be the annual open enrollment period). In that case, a short-term health plan might be your best choice, as your coverage options are generally limited at that point.
Before you opt for short-term coverage, you’ll want to check to see if you’re eligible for Medicaid, which is open year-round, or a state-run plan that has more enrollment flexibility. But if there are no other options available, a short-term plan could be a solution to cover you until the next open enrollment period (or until you get coverage from a new employer), if short-term plans are available in your state.
Don’t worry, get covered
The short story on all of this? Coverage is available, and obtaining your own health plan isn’t as complicated as it might seem at first glance, even if you’ve had employer-sponsored coverage all your life.
You can sign up outside of open enrollment if you’re losing your job-based insurance, and there’s a good chance you’ll qualify for financial assistance that will make your new plan affordable.
You can learn more about the marketplace in your state and the available plan options by selecting your state on this map.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.