Minding the gap: What to do when facing the loss of health coverage

Finding the right health care coverage can be stressful — especially when facing a potential coverage gap.

Whether due to a career switch, job loss or because you opted to retire before you’re eligible for Medicare, you have options when it comes to health insurance.

We can help you assess the various costs and considerations involved in addressing your health care needs while keeping your financial goals on track.

Here’s a look at some common scenarios where people face potential gaps in health insurance — and how to get covered:

In this article:

• If you’re between jobs
• If you retired before Medicare eligibility
• If you’re unhappy with your current coverage
• Questions to discuss with us

If you’re between jobs

If you had health insurance through work and experience a job loss or face a transition period from one employer to another, you have several options for getting coverage:

Your spouse’s insurance

If your spouse or partner has employer-sponsored health insurance, joining their plan is often the most cost-effective way to get coverage, if it’s allowed. And since a loss of health coverage — even if it was because you retired or left voluntarily — is consider a qualifying life event, you may be entitled to enroll in the plan immediately.

COBRA

The Consolidated Omnibus Budget Reconciliation Act (COBRA) — the law that requires most employers to provide extended coverage for up to 18 months after termination of employment — allows you to continue coverage through your old workplace’s group health insurance. Your health plan’s administrator must notify you about your COBRA options within 14 days of leaving your employment, and you’ll have 60 days to sign up or decline coverage. However, you will likely pay significantly more than when you were an employee since (with rare exception) the company will no longer subsidize your coverage.

Health Insurance Marketplace

Purchasing coverage through the Health Insurance Marketplace created by the Affordable Care Act (ACA) is another option. These exchanges allow you to see and compare coverage based on factors, like premiums, deductibles, out-of-pocket costs and provider networks. Additionally, the marketplace allows you to see if you qualify for premium tax credits or cost-sharing reductions under the ACA. Because losing health insurance coverage due to an employment change is considered a qualifying life event, you won’t have to wait for the annual open enrollment period and can sign up immediately.

Short-term insurance

Depending on your age and the state of residence, short-term insurance can provide temporary medical coverage — for up to three years — when you are between health plans.

Private insurance

You can also obtain private health insurance plans directly from insurance companies or through a broker. There are more private insurance options than the public marketplace, but policies can be costly, and you will not be eligible for tax credits. Because these types of plans do not comply with ACA guidelines, they aren’t required to provide certain levels of coverage, so carefully review the “exclusions and limitations” information when considering this option.

Membership organizations

Some professional or affiliate organizations offer health care plans to their members. Because these organizations can get group coverage, the insurance is sometimes cheaper than plans purchased in the marketplace. However, there is a wide range of costs, benefits and eligibility, so review the details carefully.

Learn more: Managing health care costs

If you retired before Medicare eligibility

If you’ve decided to retire early or stopped working before turning 65 — the age when most people can sign up for Medicare — bridging the gap to eligibility is often necessary.

As with an insurance gap due to a job loss, accessing coverage through a spouse’s insurance, private insurance, short-term insurance and membership organizations are all possibilities. Yet there are additional options and considerations for those who aren’t working and aren’t yet eligible for Medicare:

Employer-sponsored retiree benefits

Depending on your employer (or former employer), you may have access to health plans specifically offered to retirees, even if you’re not yet 65. The policies are often similar to the group health plans provided to current employees, and some employers pay a portion of monthly premiums.

COBRA

COBRA allows you to continue coverage under your old employer-sponsored plan if you retire or stop working before age 65. But because COBRA is limited to 18 months, you’ll need to find other coverage if you retire before age 63.5 to reach Medicare eligibility.

While COBRA is often more expensive than other coverage options, it offers a benefit if you have a health savings account (HSA). While insurance premiums are not generally considered qualified medical expenses for an HSA, COBRA is an exception. That means you can pay for your COBRA premiums using your HSA to bridge the gap to your 65^th birthday, when Medicare eligibility begins.

Health Insurance Marketplace

Losing your employer-sponsored health insurance coverage due to retirement is a qualifying life event, allowing you to avoid waiting for the annual enrollment period to sign up for coverage. Using the marketplace also lets you see if you qualify for premium tax credits or cost-sharing reductions under the ACA.

If you’re unhappy with your current coverage

From cost increases to changes in a provider network, there are many reasons people seek to change their health insurance. And though most choose to get coverage through their employer, it’s not required. You can switch to a spouse’s plan, if allowed. You could also purchase a plan through the Health Insurance Marketplace or directly from an insurer if you believe it will better serve your needs. However, you won’t benefit from your employer paying a portion of your premium and you typically won’t qualify for premium tax credits.

Whether you have insurance through your employer or the public marketplace, you typically have two windows to renew your existing plan or choose a different option:

• Annual open enrollment period, which usually runs from October to January.
• Special enrollment period, which can happen any time during the year but is only triggered by a qualifying life event. You’ll generally have 60 days from the date of the qualifying life event to change or buy a plan. Qualifying life events include:
  • Losing existing health coverage
  • Getting married, divorced or separated
  • Giving birth or adopting a child
  • Starting, ending or losing a job
  • Experiencing a death in the family
  • Moving to a new county or zip code

Learn more: Things to consider during open enrollment

We’re here to help you understand your options

We can help you assess the costs and considerations involved in addressing health care insurance gaps while keeping you on track to reach your financial goals.