Working for yourself can provide much more freedom than a traditional 9-5 job. Self employed workers get the chance to pursue their own interests, set their own hours, and find work they’re passionate about. But embarking on your own path also means taking on more responsibility (and costs).
If you’re preparing to leave your full-time job, you might be concerned about losing your health insurance. After all, employer-based coverage provided insurance to more than half of Americans in 2021, according to U.S. census data.
Thankfully, leaving your job doesn’t have to mean losing your coverage, even if you quit voluntarily. After experiencing a major life event, you might qualify for a special enrollment period, during which you can purchase new health insurance.
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The Special Enrollment Period For Those Who Lost Employer-based Health Insurance
Workers who have recently lost health insurance or expect to lose coverage soon can enroll in a new Marketplace plan during a Special Enrollment Period (SEP). Otherwise, adults can only sign up for health insurance during open enrollment, typically from Nov. 1 through Jan. 15.
However, life doesn’t always happen on schedule. Therefore, the federal government grants an SEP to people experiencing a major life event, such as:
- Marriage
- Divorce
- The birth of a child
- Moving
- Losing employer-based health insurance for any reason
The SEP lasts 60 days from the qualifying event. When leaving your job, you can apply for health insurance within 60 days before or after your loss of coverage. After choosing a new plan, you have 30 days to submit any required documents. Coverage begins on the first day of the month after your employer-based insurance ends.
Eligibility Criteria
The first step is making sure you’re eligible for the SEP. To be eligible, you must:
- Experience a qualifying life event: You must be within 60 days of losing coverage due to a qualifying life event.
- Have proof of previous employer-based coverage and loss of coverage: You can use a pay stub to demonstrate deductions for health insurance or an official letter.
- Not have Medicare coverage: Medicare plans are not sold through the Marketplace, and you cannot have both types of insurance.
- Live in the United States: Marketplace plans cover healthcare from U.S.-based providers. You must bea citizen, U.S. national, or lawfully present individual to gain eligibility.
Who Cannot Purchase a Marketplace Plan?
Under the Affordable Care Act, certain groups of people are excluded from purchasing health insurance through the ACA marketplace. These exclusions include incarcerated individuals and residents of U.S. territories. Here’s why:
- Incarcerated Individuals: Incarcerated individuals, such as those in prisons or jails, are excluded from purchasing health insurance through the ACA marketplace. This exclusion is primarily because the government provides healthcare services for incarcerated individuals through correctional healthcare systems. Inmates receive healthcare coverage directly from the correctional facility or through Medicaid if eligible.
- Residents of U.S. Territories: Residents of U.S. territories, including Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands, are also excluded from purchasing health insurance through the ACA marketplace. Instead, these territories have separate health insurance systems or programs funded differently from the ACA.
The ACA marketplace and its subsidies are designed for individuals residing in the 50 states, the District of Columbia, and certain eligible immigrant groups. The exclusion of incarcerated individuals and residents of U.S. territories is primarily due to the unique circumstances and healthcare systems in place for these groups.
How to Sign Up During an SEP
It’s time to apply after establishing whether you qualify for the SEP. Choosing the right plan can be overwhelming, but the initial application process is straightforward.
1. Gather your documentation
The government may request proof of identity, citizenship, or household income. You should also prepare documents showing loss of coverage, such as a letter from your insurance company or employer or a letter discussing COBRA coverage. If you don’t have an official letter, you can fill out a form explaining your situation and why you cannot provide documentation.
2. Visit the Online Marketplace
Most states use the federal Marketplace, but many have their own systems. If so, the Marketplace will direct you to the correct state website. Fill out the initial application to get an estimate of insurance costs and whether financial assistance is available.
3. Work With an Agent
Certified agents exist to help you through the process if you have any questions or concerns. You can find local help in person, online, or over the phone by searching the federal or state Marketplace website. Certified enrollers can answer questions about the process, while a licensed insurance agent can offer holistic advice about your eligibility, application, options for insurance plans, and financial assistance.
4. Compare Plans
When researching healthcare plans on the ACA marketplace, consider each plan’s coverage options, premiums, and out-of-pocket costs. Review the network of healthcare providers to ensure your preferred doctors and hospitals are included. Check the prescription drug coverage for your medications and assess if you qualify for financial assistance. Additionally, consider the quality ratings and customer satisfaction of different plans. Seeking guidance from enrollment counselors or navigators can help navigate the complex process and provide personalized advice.
5. Enroll and receive proof of coverage
Once you’ve applied and been approved, you will receive a confirmation of your insurance plan and instructions to pay your first premium. Your coverage begins after this payment, as early as the first day of the month after your previous coverage ended. For example, if your coverage ends June 13, the new plan begins July 1. The insurer will mail your enrollment materials and insurance card.
Why Staying Covered Is Critical
Qualifying life events such as leaving your job are inherently busy times, and it may be easy to let your health insurance lapse accidentally, especially if you’re young and healthy. However, maintaining your coverage is crucial to your physical health and could protect you from legal penalties.
While the individual mandate is no longer Federal Law, several states require their residents to be enrolled in health insurance, including:
- California
- Massachusetts
- New Jersey
- Rhode Island
- Vermont
The penalties for neglecting health insurance range by state. In California, Massachusetts, Rhode Island, and Vermont, individuals who did not have health insurance may face a financial penalty when filing their state income taxes. New Jersey implemented a shared responsibility tax penalty for individuals who did not maintain health coverage, calculated based on a percentage of their income or a flat fee, whichever is greater.
Further, having insurance can save you from falling into debt. Almost 1 in 5 households could not afford to pay their medical bills right away. In fact, medical debt is the most common kind of debt sent to collections.
Therefore, while it may seem like an unnecessary stressor during a time of immense change, be sure to prioritize both your physical and financial health.