Co-Authored by Bob Wolfe, Associate Wealth Advisor
If you’ve been furloughed or are now unemployed, do you know how you’ll get healthcare coverage? One of the realities of health care in the United States is that coverage is often tied to employment. The Census Bureau estimates that over 50% of the population rely on their employers for insurance. As unemployment continues to rise, it’s important to understand the alternative options are available to you. We’ve outlined COBRA, Medicaid and CHIP options for how you can continue to get healthcare coverage amid the economic crisis resulting from the COVID-19 outbreak.
Consolidated Omnibus Budget Reconciliation Act (COBRA)
The COBRA Act allows most employees and their families to have access to their employer’s group health coverage should they suffer through a serious life event. In circumstances where your employment has been terminated or work hours are reduced, you, your spouse, and your dependents can purchase the same health coverage for a maximum period of 18 months. If you rely on your spouse for health coverage and your spouse dies, the period extends to 36 months. After a job loss, a special enrollment period is opened for 60 days and you must enroll within this timeframe.
There are a couple caveats to understand with COBRA. The first is it can be costly – your employer may require that you pay up to 102% of the full annual cost. To be clear, most employees pay only a portion of the total cost with their employer covering the rest. If enrolled, you’ll have to pay the full amount (employee + employer) and an extra 2%. Though expensive, the positive is that you can maintain your current network of doctors/health care professionals.
The second caveat is that not all health plans are covered by COBRA. Typically, employers that have less than 20 employees (both part-time and full-time) are exempt as well as plans sponsored by the Federal Government or by churches/related organizations.
Medicaid & CHIP
Medicaid is the most generous healthcare welfare program currently available in the country, and as a result its requirements are the most stringent. For most services, there are no out-of-pocket costs ranging from hospital stays and doctor visits to prescription drugs. Most hospitals accept Medicaid; however, doctors can choose not to participate. It is designed for lower-income individuals, but the rules vary state by state. In order to qualify, you must have income less than 138% of the federal poverty level ($17,236 per individual or $23,335 per couple). Those individuals who are not covered due to exceeding income limits that have children, their children may be eligible for the Children’s Health Insurance Program (CHIP). If you find you may be eligible, you can apply at any time by filling out an application online at Health Insurance Marketplace or going direct to your state’s Medicaid agency.
Obamacare/Affordable Care Act
Open annual enrollment starts in the fall, but if you lose health insurance coverage you are immediately eligible for coverage under the Affordable Care Act (ACA) for a 60-day period. The ACA does not exclude certain health conditions and provides a subsidy towards premium payments. You will be required to report your Adjusted Gross Income, which must be no more than 400% of the federal poverty level ($51,040 per individual or $67,640 per couple). Should your income deviate throughout the year and you earn above what you say you earned, you may be required to pay back a portion or all of your subsidy come tax time or visa-versa. This expected vs actual income is reconciled by filing Form 8962 with your taxes. These plans generally have high deductibles with low premiums.
Healthcare Coverage with Short-Term Plans
A last resort that should be considered carefully is a Short-Term plan. As of 2018, the federal government announced that individual plan buyers who are unable or unwilling to use the ACA can purchase Short-Term plans. However, the availability varies on a state-by-state basis and are prohibited in both New Jersey and New York.
If you are in a state that allows for these plans, it’s recommended you thoroughly research the options as they are often not fully comprehensive.
Important disclosure information
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