How Does Health Insurance Work When You Leave a Job?

When transitioning between jobs, maintaining health insurance coverage is a primary concern. Losing employer-sponsored benefits can create uncertainty, making it important to understand available options. Proactive planning ensures continuous access to healthcare services, avoiding coverage gaps.

Your Employer-Sponsored Plan After Leaving

Health insurance provided by an employer typically terminates on the last day of employment or at the end of the month employment ceases. The exact termination date depends on the employer’s specific policies. Consult your human resources department to confirm the precise end date of coverage.

Upon your departure, employers are generally required to provide information about continuation options, including details about the Consolidated Omnibus Budget Reconciliation Act (COBRA). The plan administrator will send a COBRA election notice outlining choices for continuing coverage.

COBRA Health Coverage

COBRA is a federal law allowing individuals and their families to temporarily maintain employer-provided health insurance when coverage would otherwise be lost. This includes job termination (voluntary or involuntary, unless due to gross misconduct) or a reduction in hours. Eligible individuals, known as qualified beneficiaries, include the employee, their spouse, and dependent children covered under the plan before the qualifying event.

The COBRA election period provides at least 60 days from the later of the qualifying event date or the date the COBRA election notice is provided. This allows individuals to decide whether to elect coverage. The notice outlines election procedures, deadlines, coverage start date, maximum duration, and monthly premium. If elected and paid for, COBRA coverage is retroactive to the date coverage would have otherwise been lost, preventing a gap.

Individuals electing COBRA are responsible for paying the full premium cost, including both employee and employer portions. Employers can also charge an administrative fee of up to 2% on top of the total premium. This means the total cost can be up to 102% of the plan’s cost. For example, if a plan cost $400 monthly, a COBRA premium could be up to $408.

To elect COBRA, qualified beneficiaries must notify the plan administrator as instructed in the election notice. This often involves completing and submitting a COBRA election form by the deadline. Once elected, the initial premium payment is due within 45 days. Subsequent payments are due monthly, with a grace period of at least 30 days. Failure to make timely payments can result in termination of COBRA coverage.

For most qualifying events, such as termination of employment or reduction in hours, COBRA coverage can last for 18 months. Other qualifying events, like the death of the covered employee or divorce, may allow for 36 months of coverage for spouses and dependent children. An 11-month disability extension can extend coverage to a total of 29 months in certain circumstances.

Health Insurance Marketplace Plans

The Health Insurance Marketplace, established under the Affordable Care Act (ACA), offers an alternative for obtaining health coverage. Losing job-based health insurance is a qualifying life event, triggering a Special Enrollment Period (SEP). This SEP allows a 60-day window before or after the loss of coverage to enroll in a new Marketplace plan.

Financial assistance is available through the Marketplace to make coverage more affordable. Premium Tax Credits (PTC) reduce monthly premium payments, and Cost-Sharing Reductions (CSR) lower out-of-pocket costs like deductibles and copayments. Eligibility for these subsidies depends on household income and family size. For 2025, individuals whose benchmark plan cost exceeds 8.5% of their income may qualify for premium tax credits, with no income cap until the end of 2025.

Various plan types are available on the Marketplace, including Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Exclusive Provider Organizations (EPOs). These plans are categorized into metal tiers: Bronze, Silver, Gold, and Platinum. Bronze plans have lower monthly premiums but higher out-of-pocket costs, while Platinum plans have higher premiums and lower out-of-pocket costs. Silver plans are the only tier eligible for Cost-Sharing Reductions.

To apply for a Marketplace plan, visit Healthcare.gov or your state’s exchange website. The application process involves creating an account, providing income and household size information, and comparing available plans. The Marketplace determines subsidy eligibility based on financial information. After selecting a plan, enrollment is confirmed, and the first premium payment is made directly to the insurance company to activate coverage.

Alternative Coverage Paths

Beyond COBRA and Marketplace plans, other avenues exist for obtaining health insurance. A common option is to join a spouse’s or parent’s employer-sponsored health plan. Losing job-based coverage qualifies as a special enrollment event for these plans, allowing enrollment outside usual open enrollment periods. Contact the human resources department of your spouse’s or parent’s employer to inquire about enrollment and required documentation.

Medicaid offers health coverage to low-income individuals and families. Eligibility varies by state, based on income relative to the Federal Poverty Level (FPL), family size, and other factors like pregnancy or disability. Individuals can apply through their state’s Medicaid agency or by completing an application on the Health Insurance Marketplace, which forwards information to the state agency if the applicant qualifies.

Short-term health insurance plans offer temporary coverage. These plans last for a limited duration, with federal rules limiting new policies to three months and a total duration, including renewals, of no more than four months for plans issued on or after September 1, 2024. Short-term plans have lower premiums but significant limitations. They are not compliant with the Affordable Care Act (ACA), meaning they do not cover essential health benefits, can exclude pre-existing conditions, and do not qualify for ACA subsidies. These plans are found through private brokers or online platforms.