The recent coronavirus pandemic has engendered many changes in workplaces. People are filing for unemployment benefits in large numbers. One of the many benefits people are being deprived of is health insurance that is more important right now than ever. According to the U.S. Labor Department, almost 20% of the labor force have asked for unemployment benefits. Companies are suffering due to the unprecedented decline in the global economic activity resulting from the COVID-19 pandemic. Consequently, employees are being furloughed or laid off. These furloughs and lay-offs are leading to the termination of the health insurance plans of employees.
Health Insurance in case of a Lay-off or Furlough
In case of a furlough that is basically a temporary lay-off, the employment benefits like Health Insurance provided to furloughed employees are often not terminated. However, the furloughed employee is responsible to cover their share in case their health insurance is not terminated.
In case of a lay-off, health insurance of the employee is terminated. However, they do have options to get some type of coverage if they look in the right place. Whether you are a laid-off employee or an employer looking out for your laid-off or furloughed employees, you can take a sigh of relief because we are here to guide you thoroughly through the Health Plan options you have if you get laid-off or have to lay off due to current workforce changes. Following options are available to you:
COBRA (Consolidated Omnibus Budget Reconciliation Act)
COBRA is a safety net provided by the Federal Government to help you after you are laid-off. You are eligible for COBRA only if you already had a Health Insurance plan sponsored by your former employer and your former employer has 20 or more employees. COBRA is available to anyone who has been terminated from their job for a reason other than gross misconduct or has lost their coverage due to the following reasons:
- A reduction in their Working Hours
- Death of the Primary Policyholder
- Quitting a Job
You must be notified that you are eligible for COBRA by your employer when your employment changes. You are usually given 60 days to avail the health coverage offered by COBRA. You may lose your chance to get a COBRA Health Coverage if you do not sign up within these 60 days. However, this timeframe is extended for some plans like Aetna during the COVID-19 crisis. If you elect to avail a COBRA health coverage, you will be required to pay your first premium within forty-five days. The health coverage offered by COBRA extends from 18 months to 3 years. However, this may vary depending upon your specific circumstances.
COBRA is a very good option after a lay-off as it has no apparent interruptions or complications. It offers an extremely smooth transition from your job and the best part is that you do not need to change your health insurance plans immediately after the lay-off. You basically get to keep the health plan you already had. You can use the same pharmacy and continue consulting the same health providers.
Drawbacks of COBRA
COBRA is an excellent option if you have a built-up nest egg or an alternative source of income to draw money from. However, if you are struggling financially, you might not want to opt for COBRA as it may not be the right choice for you. If you sign up for a COBRA plan, you’ll have to pay the costs your former company paid during your employment there along with your own premiums. On top of it, you may be subject to any modifications or alterations your former company makes to the health plan. A COBRA health plan for a single individual costs $610 monthly on an average. For family coverage, the cost can get extortionate. You may ask your employer to subsidize your premiums for some time or you may use your health savings account like HSA, HRA, or IRA to pay your premiums.
You can use the money in your IRA to pay for your COBRA health plan without paying a withdrawal penalty. You will be given up to three years to deposit the money you withdrew from the IRA without being subjected to taxation.
Individual Health Insurance Plan
If you have been laid-off, you do have more affordable options available than a COBRA health plan. Under the Affordable Care Act, a cut in your income can give you eligibility for a tax credit that will considerably lower your premiums. The Affordable Care Act also forbids the insurance companies from charging high insurance payments or denying insurance for any pre-existing conditions.
For individuals who are 65 or older, the government offers health coverage plans through Medicare. Under Medicare, you have three coverage options. These include:
- Part A / Original Medicare – It covers hospitalization.
- Part B – It covers doctor’s fees.
- Part D – It provides prescription drugs coverage.
Depending on your income, you’ll have to pay your monthly premiums.
Family Members’ Plan
If any of your family members has health insurance, you can become one of the insured in their policy. Losing an employee-sponsored health plan is deemed as a qualifying life event and gives you an eligibility for joining a family member’s health plan.
People facing a temporary gap in their health coverage like displaced workers can avail a non-renewable pro tem health insurance called Short-Term Limited Duration Insurance. However, the coverage provided by STLD is limited and does not include prescription drugs, preventive care, maternity benefits, or mental health care. It does not provide coverage for pre-existing conditions either.