What Happens to My Healthcare When I Become Unemployed?

Becoming unemployed can be an incredibly stressful time. If you're unsure of what is going to your healthcare while you are unemployed, here are a few things you can do to ensure you will have access to healthcare during this time.

Since the COVID-19 pandemic has taken over the world, U.S. jobless claims have surged to record highs. If you’ve recently become unemployed, unable to work because you’re caring for a loved one or you’ve seen your hours reduced or projects disappear, you’re not alone. There are resources available to both help replace your income and ensure you have health insurance during this uncertain time.

Resource #1: Unemployment Insurance

In order to qualify for unemployment insurance you must meet two criteria:

  1. You must have been employed by a company which paid for unemployment insurance for you, and then you must have become unemployed by no fault of your own (i.e. you didn’t quit and weren’t fired for gross misconduct).
  2. You must have met your state’s criteria for time worked and wages earned.

Before March 2020, if you were a freelancer, contract worker or a part-time employee for whom your employer did not offer unemployment benefits, you were not eligible to apply for unemployment insurance. But due to recent acts signed into law: the Family First Coronavirus Response Act (FFCRA), the Coronavirus Aid, Relief and Economic Security (CARES) Act and the Pandemic Unemployment Assistance (PUA) Act, unemployment benefits have been extended to include the above-mentioned workers as well as increase the amount of time workers are eligible for relief and the amount of money they will receive.

You must apply for unemployment benefits through the state in which you worked. If you worked in multiple states, you should apply through the state in which you currently live. To find your state’s unemployment insurance office, visit this page on the Department of Labor’s website.

Once you apply for benefits, you’ll likely receive an explanation of those benefits from your state. These documents should include how much you can expect to get each week and for how long, as well as continuing eligibility requirements.

Resource #2: COBRA

If you received employer-sponsored health insurance through a group plan and you lost that insurance once you lost your job or had your hours reduced to the point where you no longer qualified for the group health plan, you are eligible to continue your health insurance coverage through COBRA.

Once you lose your job, your employer notifies the health plan administrator and that administrator is then responsible for reaching out to you with your COBRA options. Under COBRA, you can choose to cover just yourself, you and your spouse, or you, your spouse and your dependent children. Even if you covered the entire family under your employer-sponsored health plan, you’re not required to maintain the same level of coverage under COBRA. It might not make sense to do so since you, as the employee, are now responsible for paying 100% of the plan premium.

One benefit to maintaining COBRA coverage is, if you have a High Deductible Health Plan (HDHP) with an HSA, you can continue contributing to your HSA while on COBRA. As always, those HSA contributions are tax-deductible.

Resource #3: Health Insurance Purchased Through the Marketplace

In light of the disruption many people have experienced due to the global pandemic, Healthcare.gov has opened a new special enrollment period. You can use the search function available on the site to look for plans available in your area. Depending on your income, you might be eligible for premium subsidies that could lower your monthly cost of insurance.

Resource #4: Medicaid

Medicaid is a state-run health insurance program for which you can qualify based on income, family size, disability status and other factors. Some states have recently expanded their Medicaid coverage to include more people, some have not. To see if you qualify for Medicaid coverage, visit this page on the Healthcare.gov website.

Resource #5: Your HSA

Even if you’ve had to stop contributing to your HSA, the money you’ve saved can be an important resource during these trying times. In most cases, you can’t use it to pay for premiums, but you can use this money to pay for out-of-pocket medical expenses. Just make sure you only use the money on qualified medical expenses (if you’re under the age of 65) so you don’t incur a tax penalty.

You can use your HSA to pay for premiums under these scenarios:

  1. Long-term care insurance as stated under IRS publication 502
  2. Health Care Continuation (such as COBRA premiums)
  3. Coverage when receiving federal or state unemployment benefits
  4. Medicare premiums (Part A and Part B) and other healthcare coverage if you are 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap)

Losing your job and health insurance is a stressful life event in and of itself, but when coupled with the uncertain times brought by the COVID-19 pandemic, it can feel catastrophic. But rest assured, there are resources out there for you to help you weather this storm.

Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.

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