How to Get Medical Insurance After a Layoff

COBRA, ACA Plans, or Short-Term? Choose the Right Plan for Your Circumstances

A young executive examines her healthcare options.
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Getting laid off is stressful enough. You’re thinking about how you’ll continue to pay bills, avoid late or missed payments, and hopefully stay in your home and keep the lights on. Health insurance may not be top of mind, but you’ll need to start browsing options as soon as you can. The main options you have are COBRA, the health insurance marketplace, and short-term health insurance. Here’s how to decide which one is right for you.

If possible, ask your human resources department or check your policy documentation to find out how long you have health insurance after your last day of work.

Key Takeaways

  • Not all health insurance options have the same benefits and costs. Some are only available at certain points in the year and may cost you more than what you were paying when you were employed.
  • COBRA plans keep your employer-sponsored health insurance going for up to three years, but they tend to be expensive.
  • Health insurance marketplace plans have limited sign-up periods but provide guaranteed services you may not get with a short-term plan.
  • If you can’t keep your current insurance plan through COBRA and aren’t eligible to enroll in an ACA plan, you may have to apply for short-term health insurance. But this isn’t available for everyone. 

What Is COBRA?

The Consolidated Omnibus Budget Reconciliation Act, or COBRA, allows you to continue your current employer-provided health insurance for a certain amount of time if you’ve been laid off, lose hours, change jobs, and a few other circumstances. However, your premiums will likely be more expensive than what you were paying when you were employed, because your employer typically pays for a certain portion of your premiums.

Note

COBRA is typically only available to state and local government employees or those who worked for private businesses with at least 20 employees.

Pros

  • Keep your current plan: COBRA lets you keep your current plan—if eligible—exactly the same, with the same services and features.
  • Decent term length: Depending on your plan, regulations allow you to keep your COBRA coverage for 18 or 36 months.

Cons

  • Expensive choice: You’re on the hook for up to 102% of the plan cost, which may be more than you can afford to pay if you aren’t working or are working fewer hours.
  • Exclusive eligibility: To be considered for COBRA, you must have an eligible plan and be a qualified beneficiary of a qualified event, like you lost your job or had your hours reduced. Also, federal employees and certain religious organizations are not eligible.

What Are Health Insurance Marketplace Plans?

The Affordable Care Act (ACA), enacted in 2010, expanded public health insurance so that individuals and families can get health care that covers 10 basic services, including pregnancy care and prescriptions. 

Sometimes referred to as “Obamacare,” the ACA established the health insurance marketplace to browse options based on where you live and the coverage you’re looking for.

Note

The ACA (Obamacare) Open Enrollment period is Nov. 1 through Jan. 15. To get coverage starting Jan. 1, you need to be enrolled by Dec. 15.

Plans are separated into four tiers based on how much your insurance company will pay for medical services: 

  • Platinum: Insurance pays 90% of costs, on average.
  • Gold: Insurance pays 80% of costs, on average.
  • Silver: Insurance pays 70% of costs, on average.
  • Bronze: Insurance pays 60% of costs, on average.

The government subsidizes a portion of your premiums (via a “premium tax credit”) if your yearly income is 100% to 400% of the federal poverty level. If your income is greater than 400% of the federal poverty line, you may still qualify for some tax credit through the end of 2025, thanks to the passage of the Inflation Reduction Act.

Note

You can switch from an employer plan to a health insurance marketplace plan, but you likely won’t qualify for any of the premium tax credits even if you meet the income requirements, making your plan more expensive.

Pros

  • Expanded Medicaid eligibility: If you live in a state with Medicaid expansion for low-income households, health insurance marketplace plans cover adults with income below 138% of the poverty level. However, if you're eligible for Medicaid, you're no longer eligible for tax credits or savings on out-of-pocket expenses under health care marketplace plans.
  • Tax credits for low-income households: Premium tax credits are available to reduce monthly payments to your insurance company. If your income goes down, you may qualify for a higher tax credit.
  • Layoffs grant a special enrollment period: If you lost your health coverage because of a layoff or job loss (or expect to soon), you can sign up for health insurance through a special enrollment period (SEP). For 2022, such monthly SEPs will be available all year to those with income up to 150% of the federal poverty line.
  • Use after or instead of COBRA: If your COBRA coverage is running out or your COBRA plan costs change, you may qualify for a special enrollment period. However, if you end your COBRA coverage early, you do not have access to the special enrollment period and will have to wait until the next Open Enrollment.

Cons

  • Limited network depending on the plan: In 2022, nine states and the District of Columbia offered either one or two insurance providers. As such, you may have to choose between a cheaper plan with a limited network over a more expensive plan with a bigger network.

What Is Short-Term Health Insurance? 

Short-term health insurance is a type of insurance plan that provides temporary medical insurance during “in-between” stages, like if you’ve been laid off from your job and lost your coverage but don’t yet qualify for a new workplace health insurance plan. Short-term plans provide coverage for less than 12 months, but may be renewed for a duration no longer than 36 months in total.

These are different from health insurance marketplace plans, which have certain standards and minimum requirements that must be met to be on the exchange, like maternity care and preexisting condition coverage. Short-term health insurance plans are not required to meet federal health insurance standards.

Pros

  • Immediate coverage: You can secure health insurance quickly and often don’t see a gap between your old insurance and short-term coverage.
  • Cancel whenever: If you find a new plan elsewhere, such as through a new job, you can cancel your insurance anytime without facing a penalty.

Cons

  • Potentially high cost: Since short-term health insurance isn’t required to meet the same minimum requirements of the ACA, you could pay full out-of-pocket costs for some services that would otherwise be free.
  • Lack of services: Short-term health insurance doesn’t have the same stringent standards that ACA plans do, which means you’re not getting full health care coverage, whether you immediately need it or not.
  • Approval based on health: If you have preexisting conditions, you may not be approved for coverage. Many short-term plans request a questionnaire to be completed when applying, and your health could mean you get denied.
  • Not available in every state: As of 2020, twelve states have effectively banned short-term plans, and 13 states and the District of Columbia have limited them to three months without renewal.

How To Choose Between COBRA, ACA, and Short-Term Insurance

Going through a layoff is hard enough, but you’ll need to go through your health insurance options to pick the best one for you right now. 

For most people, ACA plans are usually the right fit during special enrollment periods. They have extensive coverage and can serve as a relatively comprehensive stopgap until you get a new plan through your new employer. But you may have certain circumstances that require different plans.

You Like (and Can Afford) Your Current Plan: COBRA

If you lost your job but have a solid severance package or are otherwise well-off, consider keeping your old plan until your COBRA coverage ends or you find a new job that offers health insurance. While you’re on the hook for the cost your employer used to pay, it might be worth it to keep what you have as long as you can.

You Have Preexisting Conditions: COBRA or ACA

If you have chronic health issues, you may want to keep your current plan under COBRA as long as you can until you find a long-term option. If you have preexisting conditions, including pregnancy, an ACA plan might be a better option.

You Missed the ACA Special Enrollment Period: ACA the Following Month or Short-Term Insurance

In prior years, missing the special enrollment window could prove to be extremely challenging as you would then have to find a stopgap measure till you qualified for insurance elsewhere.

Note

For 2022 coverage, special enrollment periods for ACA plans will be available monthly to those with incomes up to 150% of the federal poverty line.

If you don't qualify for the SEP and have exhausted all your other options, you may consider short-term health insurance until you qualify for a traditional health insurance plan somewhere else.

Frequently Asked Questions (FAQs)

What happens to my health insurance if I'm laid off?

If you experience a layoff, you'll lose your health benefits along with your job. Your insurance will either end on your last day of work or it might last until the end of the month. Either way, it's important to set up your new coverage right away, so you can avoid any gaps in coverage. For example, health insurance marketplace plans won't take effect until the first day of the month after you lose your job.

Does a layoff count as a qualifying event for getting health marketplace insurance?

Losing your work-based health insurance qualifies you for a Special Enrollment Period, which means you don't have to wait for open enrollment to sign up for a new plan on the marketplace. You have up to 60 days after you lose your job to enroll.

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Sources
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  1. Department of Labor. "FAQs on COBRA Continuation Health Coverage for Workers." Page 1.

  2. Department of Labor. "FAQs on COBRA Continuation Health Coverage for Workers." Page 5.

  3. Department of Labor. "FAQs on COBRA Continuation Health Coverage for Workers." Page 8.

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  12. Kaiser Family Foundation. "Number of Issuers Participating in the Individual Health Insurance Marketplaces."

  13. Federal Register. "Short-Term, Limited-Duration Insurance."

  14. National Association of Insurance Commissioners. "Short-Term Limited-Duration Health Plans."

  15. Healthcare.gov. "If You Lose Job-Based Insurance."

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