Wether you plan to quit your job and travel the world for a year like me, or will simply be without health insurance between jobs, short term health insurance may be right for you. In this blog post, learn about this and other health insurance options after quitting your job.
At least for myself, I see short term health insurance as a better and cheaper alternative to other options such as HealthCare.gov and COBRA. If you don’t know what any of these options are, don’t worry, I’ll do my best to explain them all to you.
And before we dive into your medical insurance options here, let me just say that this article is strictly based on my situation and research. I am a 28 year old, healthy, single, male with no kids living in Pennsylvania. Please keep your own personal situation in mind when reading through this blog post.
What Are Your Health Insurance Options After Quitting Your Job?
As I stated above, you have a few options for health insurance after quitting your job. Here are three options that I considered after quitting my job.
- COBRA: The Consolidated Omnibus Budget Reconciliation Act gives workers who lose their health benefits the right to continue group health benefits provided by their employer for a limited period of time.
- Health Insurance Marketplace: HealthCare.gov is a health insurance search engine that offers subsidies to those who earn less than four times the federal poverty line.
- Short Term Health Insurance: Short term health insurance plans provide temporary and limited health care coverage.
Monthly premium: $474.91
COBRA basically allows you to keep your health insurance that you have with your employer for up to 18 months after you quit your job. The catch here is that your employer won’t be paying a portion of your monthly health insurance premium anymore, so you are stuck with paying 100% of the premium.
At my previous job, I paid $37.83 every month for my health insurance and my employer paid $437.08. If I exercised my right under COBRA to continue with this health insurance plan after quitting my job, I would have to pay $474.91 ($37.83 + $437.08) for my health insurance every month.
So you can see that although you can keep your current health insurance plan, you will probably pay a great deal more than what you’re currently paying.
Health Insurance Marketplace i.e. HealthCare.gov
Monthly premium: $356.64 to $692.14
Getting health insurance from HealthCare.gov is another option. The health insurance plans on here differ by state and will also differ depending on your age and income.
For me, I have 15 plans to choose from ranging in price from $356 to $692 with deductibles between $800 and $7,350.
The common problem with all of these plans are a very high out of pocket maximum—either a whooping $5,000 or $7,350. Another limiting factor of these plans are that many of them only provide coverage in the state that you live in. These are the EPO, HMO, and POS options.
Additionally, there were 3 PPO options: Capital BlueCross Bronze, Silver, and Gold which would give me national health insurance coverage when traveling around the United States. These plans would give me the best coverage, but they are the most expensive plans on the health insurance marketplace.
Subsidized Health Insurance through HealthCare.gov
One important factor to consider when shopping for health insurance on the marketplace is your income. If your salary is less than four times the federal poverty level, you will qualify for subsidized coverage that will lower your health insurance costs. In 2018, the federal poverty level is $12,140 for individuals. So for me as an unmarried male without kids, if I make less than $48,560 in 2018, I will get a tax credit that lowers my HealthCare.gov health insurance monthly premium.
For example, let’s say my income in 2018 ends up being $40,000. That makes me eligible for a $282 per month premium tax credit. This means that instead of paying $356.64 for the cheapest health insurance marketplace plan, I will only have to pay $74.64.
My income for 2018 will probably be under $48,560, but due to the high out of pocket maximums and the limited coverage area for the plans on HealthCare.gov, I decided against purchasing health insurance through the health insurance marketplace. I suggest that you take a look for yourself, though, to see if any plan on HealthCare.gov makes sense for your situation.
Short Term Health Insurance
Monthly premium: $65.33 to $111.88 plus a tax penalty
As its name implies, short term health insurance is a health insurance plan intended to cover you for a limited period of time. This is perfect for gaps in health insurance such as when you quit or lose your job.
Until October 2018, short term health insurance plans can only be up to 3 months in duration by law. After that, short term health insurance plans will be available for up to a year.
Short term health insurance plans primarily cover you in emergency situations. In general, the coverage is limited and does not cover things such as pre-existing conditions, pregnancy, and prescription drugs for example.
The upside here is that short term health insurance costs much less than traditional health insurance plans. But honestly, if you are relatively healthy and only want health insurance coverage for a catastrophic situation, short term health insurance may be right for you.
Limitations of Short Term Health Insurance
Short term health insurance plans may sound like a godsend, but they are not without their limitations.
- Deductible resets when you renew your short term health insurance. Let’s say you meet your $2,500 deductible during a 3 month short term health insurance plan. If you renew your plan, your contributions to your deductible reset back to $0.
- Short term health Insurance does not meet Minimum Essential Coverage. The government does not recognize short term health insurance plans as proper health insurance. Until 2019, you will pay a tax penalty for every month that you are not covered by an approved health insurance plan.
- Short term health Insurance does not cover pre-existing conditions. If you break your arm and try to sign up for short term health insurance, your broken arm would be considered a pre-existing condition and would not be eligible for health insurance coverage.
What is the Short Term Health Insurance Tax Penalty?
Until January 1, 2019, the government will charge you a tax penalty for every month that you don’t have what they consider to be proper health insurance. Unfortunately, the government doesn’t recognize short term health insurance plans as proper health insurance.
You can use the Individual Shared Responsibility Provision Payment Estimator on the IRS’s website to estimate your tax penalty for not having proper health insurance.
In my case, I will pay a tax penalty between $61.67 and $82.50 for each that I am “uninsured” between September and December assuming I have an income of $40,00 to $50,000 in 2018.
What is the Best Health Insurance Option After Quitting Your Job?
In my situation, I plan to go with a 1 month short term health insurance plan from National General for $111.88. Then in October 2018 when the law allows short term plans of up to 12 months, I will sign up for one of these longer duration plans.
Between September and December 2018, I will have to pay a monthly tax penalty up to $82.50 assuming I make $50,000 in 2018. Then in 2019, the tax penalty for not having health insurance will be lifted and I will only have to pay the premium for my short term health insurance plan without penalty.
My National General plan through Aetna has a $2,500 deductible. After my deductible is met, my insurance company will pay 100% of my medical bills.
Between all of the options on HealthCare.gov and COBRA, this is by far the most suitable coverage for me. In addition, the short term health insurance plan is the cheapest option too, even when considering the tax penalty in 2018.
Like I said multiple times, this is my reasoning for choosing a short term health insurance plan after quitting my job. Your situation will probably be different. I can only hope that you find some useful information from my experience.
Let me know in the comments below what you plan to do for health insurance after quitting your job.