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Suddenly Unemployed? Healthcare Options You Should Consider

October 29, 2020

COVID-19 has impacted people’s lives across the globe and has slowed down the global economy. Millions of Americans are currently unemployed which could mean loss of company-sponsored health insurance for them. We want to highlight the health coverage options that are accessible to help get through these challenging times.

COBRA

The Consolidated Budget Omnibus Reconciliation Act, or COBRA, allows employees to continue their employer-sponsored coverage for a period of 18 months (or longer depending on factors that contributed to the loss and state requirements). Employers who sponsor group plans that fall under a law called ERISA (Employee Retirement Income Security Act), are generally considered welfare plans that may be subject to COBRA if an employer has at least 20 or more employees during typical business days in the prior calendar year. Churches, church-related organizations and the Federal government are not subject to COBRA.

Employees are provided with COBRA information upon hire and upon termination if the law is applicable to their worksite. Some states also have their own versions of COBRA which may have different rules than those established under Federal COBRA. Plan administrators for COBRA can charge an additional 2% fee for COBRA administration. Since COBRA costs are fully borne by the participant, the cost of this coverage along with the administration fee can sometimes make COBRA a tough reach for an employee who has lost a job.

The Affordable Care Act – Marketplace Coverage

Since COBRA can sometimes be too expensive, an employee who loses coverage through loss of employment should also consider Marketplace Coverage. The Marketplaces were created as a part of the Affordable Care Act (ACA). Using an online navigation tool, individuals can search for coverage options that will fit their budget and needs. Plans under ACA are categorized into four levels, designated by metals: Platinum, Gold, Silver and Bronze. The richer the plan, the more expensive the premium. The Healthcare.gov site provides calculators to determine if the individual may be eligible for any cost reductions. For someone who is unemployed, this can be a tremendous advantage.

Coverage through a parent

If an employee is under the age of 26, it is possible that they may qualify to join a parent’s health plan. Adult Children can be covered by a parent even if:

  • They get married
  • Have or adopt a child
  • Start or leave school
  • They don’t reside with their parents
  • They are not claimed as a tax dependent
  • They turn down job-sponsored coverage.

This coverage ends at 26 under federal law, however some states have created extensions that, under certain parameters, allow a child to remain covered by a parent beyond 26. As many as 30 states have created extensions of coverage for young adults. Parents should contact their HR representative for information about coverage options beyond age 26 in their state.

Medicaid

Depending on the individual’s financial situation, coverage can sometimes be obtained via a program called Medicaid. Medicaid is a partnership between the Federal Government and State Government to provide health insurance to people who have low income, have children that need coverage, have disabilities, due to pregnancy, or many other situations. Each state has its own version of this coverage, so it is best to check eligibility by contacting the state of residence to determine what is available.

Medicare

If an employee is 65 or older, or has been disabled for 24 months, or suffers from either End-Stage Renal Disease or Lou Gherig’s Disease, they may be eligible for Medicare. In fact, employees who are 65 or older and lose their job are well-advised to consider electing Medicare, since COBRA cannot be utilized to delay enrollment despite the employer size at the time of termination. Medicare enrollment is processed through the Social Security Administration. Even if the employee is not planning to collect Social Security, they can sign up for Medicare.

Medicare consists of several parts. Part A covers inpatient hospitalization, the first 3 pints of blood, the first 100 days in a skilled nursing facility and hospice care. Part B covers all major medical services including office visits, lab and x-ray services, therapy services and many other medical-related services. Part D is for prescription drugs and must be purchased separately through a commercial insurance carrier. There is also an option to enroll in Medicare Part C – also known as Medicare Advantage Plans, which combine all the parts of Medicare into one program offered through commercial carriers.

Guidance for Medicare election can be found by contacting the local SHIP or State Health Insurance Assistance Program. There is one in every state and they are run by the state’s agency on aging, so the advice is free and unbiased.

Short-Term Plans

If an employee is not eligible or is unable to afford any of the aforementioned options, they might consider short-term plans. While the plans cost less than most health insurance, they cover very few medical services. Short-term plans have many caveats that the consumer should be well-aware of before deciding on this type of coverage.

Short-term plans generally include:

  • Medical underwriting. Because of this, applicants in poor health can be declined for coverage, or can be charged more to have coverage.
  • Exclusions for pre-existing conditions. These plans are not required to follow the ACA rules for pre-existing conditions and can consider them when approving coverage.
  • Lack of coverage for essential health benefits. Typical short-term plans may not cover maternity care, prescription drugs, mental health care and other essential benefits.
  • Lifetime and annual limits. Coverage from these plans may be capped which can be an issue for those who need extensive care.
  • Lack of caps on cost-sharing. While employer policies are capped at a certain point (referred to as an Out-of-Pocket Maximum), short-term plans can require any cost sharing they choose.
  • No requirement to adhere to ACA rules: The rules that apply to ACA-protected plans do not apply to these short-term policies. This can leave a gap in coverage, an inability to obtain coverage at all and other consequences.

Choose carefully – choose wisely

Employees should be encouraged to take all factors into consideration when making a choice to replace lost coverage. Eligibility, while certainly a factor in terms of what is available to choose from, does not minimize other considerations such as cost, network of providers and current health status. Careful research into all viable options can help make life easier at a time when other aspects may be challenging.

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.

This post may contain hyperlinks to websites operated by parties other than TriNet. Such hyperlinks are provided for reference only. TriNet does not control such web sites and is not responsible for their content. Inclusion of such hyperlinks on TriNet.com does not necessarily imply any endorsement of the material on such websites or association with their operators.

By Janice Scherwitz

Janice Scherwitz is a benefits compliance analyst at TriNet.

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