Have you ever daydreamed about storming out of your office, dramatically shouting, “I quit!” to your boss as you walk through the door? It can be tempting to put in your two weeks’ notice on a whim so you can move on to bigger and better things. However, it’s never wise to let your emotions dictate when and whether you should quit your job. There are several practical considerations to take into account before making the plunge, especially if your employer provides health insurance.
Under the Affordable Care Act, you can be penalized for letting your health insurance lapse for more than 2 months. Having a plan for health insurance coverage before you quit will not only protect you should you need health care in between jobs, but it will also prevent you from having to pay the penalty for failing to obtain coverage.
Go Over Your Options with an Agent
As you weigh the pros and cons of quitting your job, start by finding an insurance agent you trust. If you don’t have another job with health insurance benefits lined up, you’ll want to make sure you’re able and ready to pick up the tab on your own before quitting.
You’ll find that some options—including plans in the government marketplace—are priced according to your income. Those calculations are based on your entire year’s income, so if leaving your job means you’ll be taking a pay cut, make sure you select a plan you’re confident you can afford. You’ll also want to ensure that your preferred hospitals and doctors are covered under your new plan. A good agent will be able to answer your questions about each plan and guide you to the option that best meets your needs and budget.
In this article, we will cover three different healthcare options available to you once you leave your job: staying on your current plan, getting on your spouse’s plan, and purchasing a new plan altogether. Knowing all of the possibilities and going over them with your agent can ensure that quitting your job is a joyful decision rather than one fraught with stress about your health care.
Option #1: Stay on Your Employer’s Plan through COBRA
Your first option for health insurance when quitting your job is to stay on your job-based plan. COBRA is a federal law that allows you to stay on your employer’s plan for a certain period of time, typically no longer than 18 months. COBRA was originally passed to protect individuals with preexisting conditions who may struggle to find coverage after losing their jobs. Under the Affordable Care Act, no one can be denied coverage for a preexisting condition, ensuring that everyone has the option to purchase a plan through the government marketplace.
If you decide to stay on your current plan, you’ll enjoy the same coverage but will pay the full premium yourself, plus an administration fee.
Although it can be convenient to keep your current coverage, footing the entire bill yourself can also make it very costly. Make sure you’ve compared all of your options with an agent before taking this route.
Option #2: Get on Your Spouse’s Plan
If you're married, check with your spouse’s employer to see if you can be covered through their job. One advantage of this solution is that your health insurance as a family is simplified and streamlined. You and your spouse will enjoy the same coverage and have access to the same health care providers.
Even if you choose not to take advantage of your spouse’s coverage, know that if the option is available to you, you will not qualify for tax credits or savings on a marketplace plan. There is, however, one exception to this rule: if your spouse’s plan does not meet affordability standards, you may still qualify for tax credits. Although this is an unlikely outcome, since nearly all plans meet those standards, even if they have extremely high premiums.
Option #3: Purchase a Plan Privately or on the Government Marketplace
Under the Affordable Care Act, there is a yearly open enrollment period during which you must purchase health insurance. However, leaving your job will qualify you for a special enrollment period, allowing you to purchase a plan on the government marketplace right away. If you go with this option, you’ll need to provide proof that you’ve lost employer-provided coverage.
Your agent can help you decide between a private plan or a plan on the marketplace. Make sure you fill out a marketplace application to see if you qualify for income-based savings or tax credits. Remember to keep in mind what your income will be after quitting your job when determining which plan you can afford.
Before leaving the confines of your cubicle for good, take time to discuss your health insurance options with a trusted agent. Compare your employer’s plan to the plans available through your spouse, private companies, and the government marketplace.
The most important thing to remember is that you need to get health insurance as soon as possible. A gap in health insurance puts your health care at risk and could lead to a tax penalty if you wait too long to find a new plan. If you land the job of your dreams somewhere down the road, complete with a brand new job-based insurance plan, you can cancel a marketplace plan at any time without penalty.
Whatever you decide, make sure you take the time to carefully weigh out all of your options. If you commit to a plan only to find out that it's too expensive or doesn’t cover your preferred healthcare provider, you will not be eligible to select a new plan again until open enrollment.
Once you determine which health insurance option is best for you, you will be one step closer to packing up your desk and walking out of your office for the very last time.