What Happens to My Health Insurance When Changing Jobs?
Just the Essentials…
- It’s important to maintain health insurance when changing jobs.
- HIPAA laws help you transfer your health insurance coverage from one employer to the next.
- COBRA helps you avoid lapses in health insurance coverage.
- A short-term health insurance policy could be your best alternative to COBRA.
What Insurance Questions Should I Ask When Changing Jobs?
There are several important questions that you’re likely asking yourself as you change jobs, including:
- “How will I get along with my new colleagues?”
- “Will this new position be everything I hoped it would?”
- “What happens to my health insurance when changing jobs?”
That last one pops up less often than the others, but it’s a very important question to ponder during a job transition nevertheless. Whether you left your position voluntarily or involuntarily, it’s crucial to know how you can maintain some form of health insurance when changing jobs so that you can better protect yourself and your family during a potential health crisis.
Knowing how to maintain health insurance when changing jobs can really set your mind at ease. Let’s take a look at how you can ensure that there is no lapse in your coverage.
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How Important is it to Remain Covered Between Jobs?
If you’re moving to a different job or even if you’ve recently lost one, you must make sure that your health insurance coverage does not lapse. This way, you’ll be able to avoid the many difficulties that usually come with a lapse in coverage. Avoiding a lapse is important for a number of reasons, including the following:
- Paying out-of-pocket for medical costs can cause a major financial burden. This can be tough to recover from if you’re between jobs. Without coverage, you’ll likely end up paying far more out-of-pocket than you would with coverage.
- Medical events that happen while you’re uninsured may not be covered on your new employee health plan. This is because such events are considered pre-existing conditions.
- If you have a pre-existing condition, such as diabetes, heart disease, or cancer, you may encounter a pre-existing condition clause in your future policy.
You may be nervous about tackling an extra financial burden by taking on a health insurance plan while you’re between employee insurance plans. It’s important, though, to make sure that you aren’t putting yourself and your family at greater risk by having no health insurance coverage at all.
What is HIPAA?
The acronym “HIPAA” stands for the Health Insurance Portability and Accountability Act. Most people associate HIPAA with its Title II Provision of keeping your medical and health information private, but the law does more than that.
A main tenet of the HIPAA law is to make your health insurance portable between plans. Put another way, it makes your insurance portable with the Title I Provision. The HIPAA law provides the following “umbrella of protection”, according to the United States Department of Labor:
- HIPAA limits the ability of a new employer plan to exclude coverage for pre-existing conditions.
- HIPAA provides additional opportunities to enroll in a group health plan if you lose other coverage or experience certain life events.
- HIPAA prohibits discrimination against employees and their dependent family members based on any health factors they may have, including prior medical conditions, previous claims experience, and genetic information.
- HIPAA guarantees that certain individuals will have access to, and can renew, individual health insurance policies.
This is excellent news when you’re in the process of transferring from one job to another. The HIPAA “umbrella of protection” helps you avoid issues that might arise when you’re moving to a new employer-based health insurance plan. In addition to what’s covered under the Title I Provision, provisions in Title IV protect insurance by further defining the guidelines for the continuation of coverage between employers, even if one of the employers has company-owned insurance.
If you’re moving from one company that provides health insurance coverage to another, HIPAA makes sure your coverage continues without a lapse. This brings up another question: what happens if you lose or quit your job?
The COBRA Plan
COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is a law that allows employees and dependents to keep a group health insurance plan after leaving the company that provided it. COBRA is designed to help you avoid a lapse in health insurance coverage during a period of unemployment, regardless of why you became unemployed.
How Does COBRA Work?
When your job terminates for any reason, you are allowed by law to continue coverage on your previous employer’s health insurance plan. During this time, you have 60 days to decide if you wish to continue the plan and another 45 days after making your choice before you must start paying the premiums.
You are essentially covered by your previous employer’s health insurance plan during this period, but you have to cover the premiums if you file a claim. For this reason, COBRA policies can be very expensive.
Drawbacks of the COBRA Plan
The cost of COBRA is a major drawback, and is a big reason why many opt out of the coverage after losing or leaving a job. Why does a COBRA health insurance plan cost so much? Essentially, it’s because you’re taking on the full amount of the premium.
During employment, your employer pays a large portion of your group policy premium as part of your benefits package. An employer typically covers 70 to 90 percent of group premium costs. As a result, you only had to pay 10 to 30 percent of the premium. Upon termination of your employment, however, the employer no longer bears responsibility for paying part of the premium, and you are now required to pay 100 percent of the premium to maintain health insurance coverage.
Additional drawbacks to COBRA may include:
- The limited availability of COBRA coverage. COBRA coverage only lasts for a period of 18 to 36 months, depending on the qualifying event that gave rise to the COBRA rights.
- The possibility of changes in coverage. If your previous employer changes health insurance plans, this means you’ll automatically get whichever plan they adopt. As a result, you’ll have to accept the changes that go with it.
- Because COBRA is group insurance, it may or may not fit your needs. As you’re now paying full price, you may be more aware that your current plan offers too much or too little coverage for your needs in certain areas. Either way, you may discover that COBRA may not be the most cost-effective option for you and your family.
COBRA is helpful in that it helps you avoid a lapse in coverage while you’re unemployed or between jobs. However, there are alternatives to retaining your old health insurance plan that avoid the risk of being denied coverage for existing conditions or other exclusions.
Short-Term Health Insurance Plans
One of the best alternatives you may find to a COBRA plan is a short-term health insurance plan. These plans can be a good way to help you bridge the gap between being covered under a previous employer plan and being covered under the plan of a new company. Short-term health insurance plans can be more cost-effective, typically covering periods that last from six months to a year.
Short-term health insurance is designed to provide coverage for three medical services:
- Doctor’s office visits
- Emergency care
Depending on your needs, short-term health insurance can be a good stop-gap if you want to maintain health insurance but you don’t want to pay the premiums associated with a COBRA plan. Be aware, though: these plans are most helpful if you or your family have no pre-existing conditions. If you do have pre-existing conditions, then a different option may be better for you.
Before You Choose a Short-Term Health Insurance Plan…
When it comes to health insurance, it’s very important to know what you’ll be getting into ahead of time. Short-term health insurance plans aren’t sold in the ACA Marketplace, and therefore often do not follow the standards of a typical ACA health insurance plan. This means that providers of short-term health insurance can put a lot of limits on their plans that are typically not allowed on an ACA plan. Some of these limits include:
- Eligibility based on your health status. Applicants for short-term health insurance policies will typically be asked questions about their health and may deny coverage to those who answer “yes” to these questions. For example, if you are asked whether or not you have a serious pre-existing condition* and you answer “yes”, then you will likely be denied coverage based on your condition.
- Renewability of your short-term plan. With a short-term health insurance plan, your coverage ends once your policy term is up. While some of these types of policies include an option to extend or renew coverage, most do not**.
- Limits on benefits covered by your plan. Short-term health insurance policies can put a variety of limits on benefits covered by a plan, from covered doctor visits to prescription drug coverage***.
If you choose short-term health insurance coverage, you must be sure that your selected policy will cover your needs for however long you use it. You must also make sure that the coverage will transfer to your new employee health insurance plan with no issues via HIPAA when you become employed again.
*It is a general practice of short-term health insurance policies to exclude pre-existing conditions. If you make a new claim on a short-term policy, the insurer has the ability to investigate whether or not the claim relates to issues stemming from a pre-existing condition. Some policy and state laws allow insurers who sell short-term policies to refuse coverage for a condition that existed, even if there was no prior diagnosis, before you purchased the policy. There are some short-term health insurance policies that allow limited coverage for some pre-existing conditions, such as allergies, if you were otherwise healthy enough to purchase the policy.
**Unless otherwise dictated by state rules, insurers can provide short-term coverage for up to a year. Other short-term policies are available that provide coverage for three or six months. Coverage typically ends once your policy term is up, but some insurers allow you to extend or renew coverage at the end of the term. If you buy a short-term policy and get sick, you will likely not have the ability to extend or renew your coverage, even if provisions typically allow for such actions.
***Before you purchase a short-term health insurance policy, it’s a great idea to do a fair amount of research to learn what its coverage limits are. Some policies limit anything from the amount of doctor visits to overall prescription drug coverage. Some policies exclude certain benefits, such as maternity care, substance abuse treatment, and mental health services altogether.
Thanks to HIPAA and COBRA laws, it’s easier than ever to avoid going without health insurance between jobs. If you’re starting a new job immediately, HIPAA laws ensure that you can move from your old health insurance provider to a new one with no issue. If you know you’ll have a lapse between jobs, keeping your old health insurance plan through COBRA, though expensive, will help you avoid issues with chronic and pre-existing conditions when you enroll in a new employee health insurance plan.
Any health insurance plan is better than no health insurance plan at all. Even a short-term plan can be a major help in a tough situation! If you do choose a short-term health insurance plan, just make sure you know what type of coverage you’re getting and whether or not it could cause issues with coverage when you enroll in a new company health insurance plan.
Regardless of what type of health insurance plan you choose, it’s never a good idea to go without health insurance coverage for any reason.
Make sure you find a health insurance plan that delivers benefits that are best for you. Call any of our knowledgeable licensed agents today toll-free at (800) 318-9984 for assistance finding available health insurance coverage in your area.
1: Why Do Employers Pay For Health Care?
2: Health Insurance Portability and Accountability Act of 1996
5: Health Insurance Portability and Accountability Act
6: Continuation of Health Coverage (COBRA)
7: FAQs on COBRA Continuation Health Coverage for Workers
8: ACA Open Enrollment: For Consumers Considering Short-Term Policies