For many Americans, health insurance is directly tied to employment. Employer health insurance is often convenient and less expensive than other options, making it an easy decision when you need coverage for yourself or your family. But what happens to your health insurance when you want to quit?
Relying on your employer for health coverage can make the act of quitting daunting. However, it shouldn’t stop you from making the lifestyle changes you deserve. Whether you’re quitting to find another job, take a break from work, or start your own business—here’s what you need to know about health insurance before making the leap.
How Long Does Employer Health Insurance Last After Quitting?
One of the first questions about insurance you’ll probably have when thinking about quitting your job is when exactly your employer sponsored plan will end. This is decided by your employer, but will likely be either your final day of work or the last day of the month that you quit.
The lack of a safety net with job-based health insurance is part of what makes quitting intimidating to so many people. Because of this, it’s important to understand your available options and have a plan before sending in your resignation.
Options for Health Insurance Between Jobs
If you’re leaving your job with another already lined up, your best choice could likely be your new employer’s plan (though you might still be interested in exploring other options). But what if you’ll be in between jobs for a little while? No matter how long or short this period of time may be, you don’t want to be without insurance coverage. Even if you’re generally healthy, emergencies and unexpected issues can come up at any time, and it’s best to always be prepared.
Here are some of the first insurance options to consider when you plan on quitting your job:
COBRA
One of the first health insurance programs to take a look at when thinking about quitting your job is the Consolidated Budget Omnibus Reconciliation Act, or COBRA. COBRA allows you or your family to remain on the same plan that was provided to you by your employer, even after leaving your job. You can be eligible whether you have quit or been terminated from your job, as well as in the case of various other qualifying life events, such as the death of a family member or divorce. If your employer’s plan is eligible for COBRA, you will generally have 60 days from when you are offered the option to enroll. Coverage through COBRA generally lasts for 18 months after leaving your job.
This allows you to retain the same benefits and providers during your time in between jobs, making it seem more convenient and less disruptive to your life than searching for an entirely new plan. However, the cost can be drastically different. You are now responsible for the entire premium of the plan, with an additional 2% fee added on. Without your employer contributing to the cost of the plan, it may be more expensive than other plans now available to you.
Public Health Insurance
If enrolling in COBRA and temporarily keeping your employer’s plan at a higher cost doesn’t seem like a good fit for your new situation, there are more options you can explore. Shopping on the ACA marketplace for an individual health insurance plan will give you a wide variety of choices for coverage. This is a much less limited option than sticking with employer health insurance, as it gives you the ability to pick a company and plan that best suits your needs. There will likely be options that are less expensive than your old employer plan under COBRA, and they won’t permanently end after 18 months. You may even choose to keep an individual health plan once you find new employment.
Individual health plans are typically bought through the marketplace during the open enrollment period of November 1st to January 15th. But what if you want to leave your job at any other point in the year? Fortunately, leaving your job and losing employer coverage, whether it be voluntary or involuntary, is a qualified life event. This means that by applying and submitting proof that you’ve left your job, you can become qualified for a special enrollment period and buy an individual health plan on the marketplace, no matter the time of year. You typically have 60 days after quitting your job to apply for special enrollment and 60 days to shop for a new plan once you’ve been approved. If you miss the deadline, you’ll have to wait until the next open enrollment period to buy insurance on the marketplace.
Private Health Insurance
Another option you’ll want to consider in your search for coverage after leaving your job is private health insurance. Unlike public health insurance, private health insurance is not bought on the ACA marketplace, but directly from private companies. As with COBRA and public insurance, private insurance comes with its own set of pros and cons that need to be factored into your individual circumstances. Though it often comes at a higher cost, private insurance can also offer fast care and a wider array of available coverage. This can be especially helpful if you require specialized treatment, or if your income is too high to qualify for subsidies on the ACA marketplace.
The abundance of insurance options available to you can make it hard to decide which direction to go in. Fortunately, experts like myself can support you in making the best possible choice for your own personal situation.
What Type of Health Insurance Should I Buy?
If all you’re previously used to is employer health insurance plans, you may not know much about what to look for on the marketplace. When looking to buy an individual health insurance plan, you’ll have to consider a number of factors regarding your current situation, such as family, health status, finances, and more. While this may sound overwhelming, you can take a look at my detailed guide on shopping for health insurance for help with understanding the different types of coverage and plans available to you.
Other Options for Health Insurance in Between Jobs
If you don’t think that either COBRA or buying an entirely new plan on the marketplace are the best fit for you, or you miss your special enrollment period deadlines, there are still options that will ensure you aren’t left without coverage until you find a new job. Some of these options, such as short-term health insurance, may be better suited to your situation than a full plan. Short-term health insurance typically lasts anywhere from one month to one year, and while it may be more limiting than a full plan, it can also be less expensive.
Visit my guide to alternative healthcare options to find more information on what you can do for your coverage outside of the traditional choices.
Health Insurance and Starting Your Own Business
If you’re planning on quitting your job in order to start your own business, you’ll want to make sure you have a plan for health insurance before heading into your new endeavors. Your options will depend on the type and scale of your business.
If you are self-employed, a freelancer, or your business has no employees, you will want to look at getting an individual health plan on the public or private marketplace.
If your business has between 1 and 50 employees, you may be eligible for the Small Business Health Owners Program (SHOP). This can provide insurance to you and your employees outside of open enrollment. You will be able to choose the amount and types of plans that you offer to your employees, as well as how much of their premiums you pay.
Whether you’re looking for new opportunities, starting your own business, or just taking some time off—quitting your job can feel scary, especially when it comes to health insurance. But with an understanding of the many available options for health coverage at your disposal, you’ll feel ready to take on bigger and better things. Book a consultation with me today for help preparing for the next stage of your life’s journey.
