Changing jobs can be an exciting time, but it can also bring a lot of questions, like, “How does health insurance work when switching jobs?” Health coverage is essential, not just for your peace of mind, but also for protecting you and your family from unexpected medical costs. So, it's really important to understand how it works.
In this article, we'll answer the key questions that come up when you're changing jobs and health insurance. We'll explore what happens to your current plan, how to ensure continuous coverage, and what options you have if there's a gap between jobs.
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What happens to your health insurance when switching jobs?
When you switch jobs, your employer-provided health insurance doesn’t automatically follow you to your new position. Typically, your health coverage ends on your last day of employment or the last day of the month, but this can vary depending on your employer's policies and your specific plan.
“Make sure you fully understand your current coverage and costs before leaving your job,” says Griff Harris, Certified Insurance Counselor (CIC) at Griffith E. Harris Insurance Services. That’s because you will need to choose what to do next.
Health insurance considerations when changing jobs
Besides the timeframe for coverage termination, there are a few key factors to consider when evaluating your health insurance options during a job transition:
- COBRA coverage: Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), you might be eligible to continue your current health insurance for a limited time after leaving your job. However, this option can be expensive since you'll be responsible for paying both your portion and the employer's portion of the premiums.
- New employer’s coverage: Find out when your new employer’s health insurance coverage will start. There could be a waiting period, which is typically 30 to 90 days. Knowing this in advance allows you to plan for any gap periods where you may need temporary coverage.
“Compare plans thoroughly so you know the differences in coverage, limitations, and out-of-pocket costs,” Harris says. “Don’t just choose based on premiums alone.”
Understanding COBRA health insurance
COBRA is a federal law that gives you the right to continue your employer-provided health insurance coverage after you leave your job, whether the separation is voluntary or not. Essentially, it acts as a safety net, preventing you from losing your health coverage during the transition to a new job.
Here’s how it works: When you leave your job, your employer is required to inform you of your COBRA rights. You then have 60 days to decide whether to elect COBRA coverage, keeping the same benefits you had with your employer’s plan. It typically lasts for 18 months but can be extended to 36 months in certain situations, such as disability.
However, not everyone is eligible for COBRA coverage. To qualify, you must have been enrolled in your employer’s health insurance plan while you were employed. COBRA is available to employees who lose their jobs (except in cases of gross misconduct), as well as to their spouses, former spouses, and dependent children who were covered under the plan. It is also triggered by a reduction in hours, divorce, or the death of the covered employee.
Costs associated with COBRA
Under COBRA, you’re responsible for the entire premium—both your share and your employer’s share—plus an administrative fee. For example, if your employer was covering 70% of your health insurance premium, you’ll now have to pay 100% of that premium, plus the administrative fee, which can be up to 2% of the premium cost.
This means that while COBRA offers the convenience of keeping your current plan, it can be significantly more expensive than what you were paying as an employee, especially if you’re between jobs or facing reduced income.
In Harris’ opinion, it can be worth it in some cases—despite the price. “It ensures continuous coverage if needed for a pre-existing condition,” he says. His advice: “Compare COBRA to new plan costs and coverage to determine the best choice.”
Exploring alternatives during the gap period
There are several options to ensure you stay protected during this period of transition.
Temporary health insurance options
If you're between jobs and need short-term coverage, temporary health insurance plans can be a viable option. They can cover basic medical needs, typically up to 12 months, such as emergency visits and doctor appointments, but may have limitations on pre-existing conditions and preventive care.
Their main benefit is affordability and flexibility: They can be quickly purchased and provide immediate coverage. However, these short-term plans often have high deductibles, limited coverage, and may not include essential benefits like prescription drugs or mental health services. It's important to carefully review what’s covered before choosing this option.
Medicaid and state health insurance programs
If your income drops significantly during your job transition, you might qualify for Medicaid or other state-run health insurance programs. Some states offer additional health insurance programs for specific populations, such as children, pregnant women, or individuals with disabilities.
Medicaid eligibility is based on income, household size, and other factors. If you lose your job and your income falls within your state's Medicaid guidelines, you may be able to get coverage. You can apply for Medicaid through your state's Medicaid office or via the Health Insurance Marketplace. Be prepared to provide documentation of your income, household size, and any changes in employment status.
Health Insurance Marketplace
The Health Insurance Marketplace, often conversationally called “Obamacare,” offers another option for coverage during job transitions. If you lose your job-based insurance, you qualify for a Special Enrollment Period (SEP) to sign up for a Marketplace plan. These plans are comprehensive, covering essential health benefits, and may include subsidies to help reduce costs based on your income.
Typically, the Marketplace has an open enrollment period once a year. However, losing your job-based health coverage triggers a Special Enrollment Period, allowing you to enroll outside the standard period. It's crucial to act quickly, as SEPs typically last only 60 days from the date your previous coverage ends.
Signing up for new health insurance with your new employer
When you start a new job, your employer will typically provide you with information about your health insurance options during your onboarding process. Most employers offer a specific window, often 30 to 60 days from your start date, to sign up for health insurance. It's crucial to enroll within this period to avoid missing out on coverage.
Your employer might offer several health plans, ranging from high-deductible plans with Health Savings Accounts (HSAs) to more comprehensive options like Preferred Provider Organizations (PPOs) or Health Maintenance Organizations (HMOs). Take time to review each plan's benefits, costs, and network of providers.
“When evaluating new plans, focus on what’s most important to you, like covering certain doctors or treatments,” Harris says. “Compare deductibles, copays, coverage limits, and premiums. An inexpensive premium could mean higher out-of-pocket costs. High-Deductible Health Plans (HDPDs) with Health Savings Accounts (HSAs) are good if expecting minimal medical needs. Consider your health, budget, and priorities to find the proper balance of coverage and affordability,”
When does health insurance start at a new job?
The start date for your new health insurance coverage varies by employer. Some impose a waiting period before your health insurance kicks in, often ranging from the first day of the month following your start date to 90 days after employment begins.
Other employers are more flexible. “Most employers allow enrollment before you officially start, so take advantage of that,” Harris says. “To avoid gaps, start researching your options right away.” Make sure to ask your HR department about the specific start date for your coverage.
If there’s a waiting period before your new coverage starts, consider temporary insurance options like COBRA, short-term health insurance, or enrolling in a spouse’s plan to avoid any gaps in coverage.
Factors to consider when choosing a new health plan
Selecting the right health insurance plan involves more than just comparing premiums. Here are some key factors to consider:
- Coverage needs: Evaluate what medical services you anticipate needing, such as regular doctor visits, prescriptions, or specialist care. Ensure the plan covers these services properly.
- Provider network: Check if your preferred doctors and hospitals are in the plan’s network. Out-of-network care can be significantly more expensive.
- Costs: Besides the monthly premium, consider other out-of-pocket costs like deductibles, co-pays, and co-insurance. A lower premium plan might have higher out-of-pocket expenses, so balance the costs with your healthcare needs.
- Additional benefits: Some plans offer extra benefits like wellness programs, telemedicine, or discounts on gym memberships. These can add value to your health insurance.
What if you have pre-existing conditions?
Switching jobs can be particularly stressful if you have a pre-existing medical condition, as you might worry about losing coverage or facing higher costs. Fortunately, there are legal protections to keep you covered without penalty. The Affordable Care Act (ACA) prohibits insurance companies from denying coverage or charging higher rates based on health history.
This means that when you switch jobs, your new health insurance plan can’t exclude coverage for your pre-existing condition and can’t impose waiting periods for coverage of these conditions. Besides that, all ACA-compliant plans must cover essential health benefits, which include services like prescription drugs, hospitalization, and chronic disease management.
“Those with pre-existing conditions should scrutinize new plans carefully, so look at which doctors, treatments, and medications are covered and any restrictions,” Harris says. “If you're concerned that new coverage won’t meet your needs or will be unaffordable, consider negotiating with HR. It never hurts to ask, and they may be willing to work with you.”
These protections apply whether you’re switching to a new employer’s health plan, purchasing insurance through the Health Insurance Marketplace, or enrolling in COBRA. Have your medical records and documentation ready to share with your new healthcare provider, if necessary.
FAQs
If I'm changing jobs, when does health insurance end?
When you change jobs, your employer-provided health insurance typically ends on your last day of work or at the end of the month in which you leave your job. It’s crucial to confirm the exact termination date with your employer to avoid a lapse in health insurance between jobs. Planning can help you transition smoothly to new coverage.
How does switching health insurance work?
Switching health insurance when changing jobs typically involves ending your current plan and enrolling in a new one through your new employer. If there's a coverage gap, you might use COBRA, short-term insurance, or the Health Insurance Marketplace to fill that period. Be sure to review the details of your new plan, including coverage for pre-existing conditions, to ensure a seamless transition.
Is there a penalty for a lapse in health insurance between jobs?
While there is no penalty for a short lapse in health insurance between jobs, being uninsured can leave you vulnerable to unexpected medical expenses. Additionally, if you miss the window to sign up for new coverage, you could face a longer period without insurance. Using COBRA, short-term plans, or enrolling in Marketplace coverage can help you avoid this risk.
What happens to my Health Savings Account (HSA) when I switch jobs?
Your Health Savings Account (HSA) is yours to keep, even when you switch jobs. The money in your HSA remains available for qualified medical expenses, regardless of your employment status. If your new job offers a High-Deductible Health Plan (HDHP) with an HSA, you can continue contributing to the account. Otherwise, the funds will stay in your HSA for future use.