Health Insurance Options Following Loss of Employment

Health Insurance Options Following Loss of Employment

Updated May 4, 2020
Health Insurance Options Following Loss of Employment
Many Americans have health insurance coverage that is
will be subject to COBRA requirements as a result of being
provided through an employment setting. In light of the
subject to the employer shared responsibility provisions,
economic repercussions of the COVID-19 pandemic, many
which incentivize large employers to offer health insurance
Americans may lose the jobs through which they receive
coverage to their full-time employees.
health insurance. Such individuals may need to identify
another source of health insurance to remain enrolled in
Under COBRA, an employee’s voluntary or involuntary
plans that cover COVID-19-related services.
termination (for any reason other than “gross misconduct”)
is considered a qualifying event for the former employee
Three potential comprehensive coverage options for these
and his/her spouse or dependent child if such event causes a
individuals include the Consolidated Omnibus Budget
loss in the former employer’s sponsored coverage.
Reconciliation Act (COBRA) continuation coverage,
individual health insurance coverage, and Medicaid. An
Generally, a qualified individual must be allowed to elect
individual’s eligibility for these coverage options depends
COBRA coverage within (at least) 60 days from the later
on a number of factors (e.g., economic circumstances,
of: the date coverage would be lost due to the qualifying
family composition, federal/state policies). Even if an
event or the date the beneficiary is sent notice of his/her
individual is eligible for such coverage, the costs associated
right to elect COBRA coverage. No days will count toward
with some options may be prohibitive given the individual’s
this timeline until 60 days after an announced end of the
loss of income due to unemployment.
COVID-19 national emergency (or another specified date).
This In Focus provides a brief overview of eligibility,
Coverage
benefits, and costs associated with these different health
COBRA coverage must be identical to the coverage
insurance coverage types.
available to similarly situated active employees. This is
often the same coverage that the individual previously had.
For married couples in which one spouse’s job loss results
in the loss of his/her (or his/her family’s) health insurance
For terminated employees, coverage generally may last for
coverage, the spouse (or family) may be able to enroll in
at most 18 months. Employees may terminate their
coverage through the other spouse’s employer if the other
coverage at any point, and employers may terminate
spouse is working and his/her employer offers health
COBRA coverage early for specified reasons (e.g., an
insurance coverage. In general, employers offering health
employer ceases to maintain any group health plan due to
insurance benefits to their employees are obligated to offer
going out of business).
employees, who lose coverage (not sponsored by the
employer) and meet certain criteria, a special enrollment
Employers are not required to pay the cost of COBRA
period (SEP) through which the employee (and/or family)
coverage, though they may choose to do so. As such,
may enroll in the working spouse’s employer coverage.
COBRA continuation coverage may be more expensive
than other coverage options. Employers are permitted to
COBRA Continuation Coverage
charge the covered individual 100% of the premium (i.e.,
COBRA provides certain former employees, their spouse,
both the portion paid by the employee and the portion paid
and their dependent children with temporary access to the
by the employer), plus an additional 2% administrative fee.
former employer’s health insurance. (Certain current
employees may also be eligible.)
Individual Health Insurance Coverage
Individuals and families may purchase individual health
Eligibility
insurance coverage directly from an issuer in the individual
To be eligible for COBRA continuation coverage, an
market. The individual market includes the health insurance
individual must satisfy the following criteria: (1) work (or
exchanges (marketplaces), but individuals also can
be the spouse/dependent child of someone who works) for
purchase coverage outside of the exchanges.
an employer that must offer COBRA continuation
coverage, (2) experience a qualifying event, and (3) be
Eligibility
covered by his/her former employer’s sponsored health plan
In general, individuals may purchase individual health
on the day before the qualifying event occurs.
insurance coverage sold in the state in which they reside.
For exchange coverage, state residents also must be citizens
All employers that sponsor health insurance benefits are
or have other lawful status, and they must not be
subject to COBRA requirements, except employers with
incarcerated (except those pending disposition of charges).
fewer than 20 employees; church plans; and federal, state,
and local governments. In general, most large employers
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Health Insurance Options Following Loss of Employment
Federal law requires individual issuers to accept all
pathways, state coverage is mandatory (e.g., low-income
insurance applicants but may restrict enrollment to
children up to 133% FPL), whereas for others it is optional
specified times, such as open and special enrollment
(e.g., pregnant women with annual income between 133%
periods. Employees (and their dependents) who lose health
and 185% of FPL). This results in variability from state to
coverage due to loss of employment (not due to employee’s
state. For example, adult coverage differs between states
gross misconduct) qualify for an individual market SEP.
with and without the ACA Medicaid expansion.
Such individuals may enroll in a plan offered in or out of an
exchange during the SEP.
Medicaid eligibility determinations may occur at any time,
are based on monthly income, and generally apply for 12
Coverage
months. An individual may be retroactively Medicaid
Individual health insurance coverage generally must
eligible for up to three months prior to the month of
comply with numerous federal and state requirements
application, if the individual received covered services and
related to plan features and consumer protections. Included
would have been eligible had he or she applied during that
among the federal requirements are coverage for essential
period. States also may rely on enrollment facilitation
health benefits (EHBs), coverage for preexisting health
strategies (e.g., presumptive eligibility) to immediately
conditions, and a prohibition on using health status as a
enroll individuals for a temporary period until a formal
factor in eligibility or premiums.
eligibility determination is made. The Centers for Medicare
and Medicaid Services (CMS) has identified additional
Individuals who enroll in exchange coverage and meet
flexibilities around the timeliness of Medicaid eligibility
income and other eligibility criteria may receive financial
determinations given the anticipated demand associated
assistance through a federal tax credit and cost-sharing
with the COVID-19 pandemic. CMS also directs states to
subsidies. The credit reduces an eligible individual’s
screen for eligibility and enroll individuals in subsidized
insurance premium; the amount varies from person to
coverage available through the exchanges, Medicaid
person. Individuals must have household incomes that
(including eligibility for Medicaid COVID-19 testing for
generally fall between 100% and 400% of the federal
the uninsured at state option), or the State Children’s Health
poverty level (FPL) to be eligible for the credit. There are
Insurance Program (CHIP). This requirement aims to
two forms of cost-sharing subsidies: one reduces costs for
connect uninsured individuals to the appropriate coverage,
eligible individuals who typically use a lot of health care;
if one is available.
the other reduces costs for all eligible individuals. Eligible
individuals must have household incomes between 100%
Coverage
and 250% FPL and may receive both types of cost-sharing
Medicaid coverage includes a variety of primary and acute-
subsidies.
care services as well as long-term services and supports and
benefit coverage varies across states. Not all Medicaid
Medicaid
enrollees have access to the same set of services. An
Medicaid, authorized in Title XIX of the Social Security
enrollee’s eligibility pathway determines the available
Act (SSA), is a federal-state program that jointly finances
services, with some pathways providing access to limited
medical and related services to a diverse low-income
coverage (e.g., COVID-19 testing).
population. States must follow broad federal rules to
receive federal matching funds, but they have flexibility to
Most Medicaid beneficiaries generally receive services
design their own versions of Medicaid within the federal
through traditional Medicaid—a comprehensive array of
statute’s basic framework. This flexibility results in
required or optional services listed in statute. However,
variability across state Medicaid programs.
states also may furnish Medicaid through alternative benefit
plans (ABPs). Under ABPs, states must provide
Medicaid provides a health care safety net for low-income
comprehensive benefit coverage that is based on a coverage
populations. During periods of economic downturn,
benchmark rather than a list of discrete items and services
Medicaid enrollment increases at a faster rate because job
as under traditional Medicaid. Unlike traditional Medicaid
and income losses make more people eligible. In addition,
benefit coverage, coverage under an ABP must include at
those who were previously eligible but not yet enrolled may
least the EHBs that certain plans in the private health
seek enrollment.
insurance market are required to furnish. Beneficiary cost
sharing (e.g., premiums and co-payments) is limited under
Eligibility
the Medicaid program.
To be eligible for Medicaid, individuals must meet both
categorical (i.e., a group listed in statute) and financial (e.g.,
For more information on the topics covered in this product,
income, assets) criteria in addition to requirements
see CRS Report R40142, Health Insurance Continuation
regarding residency, immigration status, and U.S.
Coverage Under COBRA; CRS Report R44065, Overview
citizenship. Historically, Medicaid eligibility has been
of Health Insurance Exchanges; CRS Report R44425,
limited to low-income children, pregnant women, parents of
Health Insurance Premium Tax Credits and Cost-Sharing
dependent children, the elderly, and individuals with
Subsidies; and CRS Report R43357, Medicaid: An
disabilities; however, since 2014, 36 states and the District
Overview.
of Columbia have taken up the option to cover non-elderly
adults with income up to 133% of FPL through the
Ryan J. Rosso, Analyst in Health Care Financing
Affordable Care Act (ACA; P.L. 111-148, as amended)
Bernadette Fernandez, Specialist in Health Care
Medicaid expansion. For some eligibility groups or
Financing
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Health Insurance Options Following Loss of Employment

IF11523
Evelyne P. Baumrucker, Specialist in Health Care
Financing

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