Leaving your job means more than just leaving your employer. It also means leaving behind your benefits, like a work-sponsored health insurance plan.
Unfortunately, more people might be facing this situation amid a job market that has started 2025 on a decidedly unsteady foot.
The first jobs report of the year came in weaker than anticipated, then was quickly followed by extreme turbulence in Washington. A one-two punch of federal worker dismissals and funding freezes (the legality of which has yet to be determined) has sparked a great deal of uncertainty in the business community.
“The flurry of activity in DC has left some questioning the state of government contracts with the private sector and the potential for a decline in government employment to dent demand,” Zachary Hill, Head of Portfolio Management at Horizon Investments, said in the wake of a spike in the National Federation of Independent Business’s (NFIB) Small Business Uncertainty Index.
If you’re making a plan should you get caught up in a wave of job reductions, or even if you just intend to leave your job on your terms, read on. Today, I’m going to talk about an important aspect of leaving an employer: your options for health insurance coverage.
What Health Care Options Do You Have After Leaving a Job?
If you’re looking for backup plans, you’ve got a few to choose from.
Importantly, all of these options have significant pros and cons, many of which revolve around your level of coverage, the amount of additional risk you might take on, and expenses. And depending on your personal situation, one or more of these options might not even be available to you.
That doesn’t mean they can’t be useful safety nets. It just means you need to consider these health coverage alternatives with your eyes wide open.
1. COBRA
The Consolidated Omnibus Budget Reconciliation Act, COBRA, is when you get your old employer’s health care coverage after you’ve stopped working for them.
Pros: You get to keep your current plan while exploring other options. Using insurance through COBRA is also a good option if you have dependents on your plan, like a spouse or children. It helps them keep their insurance, doctors, and level of care. If your old employer approves it, you could get COBRA for up to 18 months after you leave your job.
Cons: Your old employer isn’t obligated to cover those premiums anymore. That means you’re on the hook for up to 102% of the cost — 100% of the plan plus a 2% administrative fee. Going this route could be an expensive option if you don’t have the income to afford it.
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2. Health Care Marketplace
With the Affordable Care Act, you can sign up for health insurance any time after you leave your job during the year.
Leaving your job qualifies as a special enrollment period, so you don’t need to wait until open enrollment to get health insurance.
Depending on your income, you might qualify for a subsidy.
Pros: The ACA marketplace gives you a chance to get affordable health insurance without having a lapse in coverage. Plans vary by how much you want to pay in premiums, copays, deductibles, etc. You might pay less than you think based on your income and expenses. You can also choose this option after using COBRA, but it’s not required.
Cons: Your plan changes from what you had before. For instance, if you went from a PPO to an HMO, you might have to change doctors and networks, which can cause a bit of a hassle. You may have to pay more than what you paid on your employer plan.
Related: How to Invest for (and in) Retirement: Strategies and Investments
3. Parent/Spouse Plan
If you’re under the age of 26, you might qualify for health insurance on your parent’s plan. Even if you’re married, you can get or stay on your parent’s plan until your 26th birthday.
If you’re not eligible for this, you might want to look into getting on your spouse’s health insurance plan through their employer, as long as they’re offering coverage for dependents.
Pros: You might be able to eliminate any out-of-pocket costs associated with getting an independent health care plan. As a result, you can focus your money on other needs, like saving for a home, car, or creating your own small business.
Cons: Once you turn 26, you’ll need to get off your parent’s plan. But this qualifies you for a special enrollment period on the health care marketplace. If you hop on a spouse’s plan, this increases monthly payments, which you’ll need to budget for now.
Related: Budgeting in Retirement: Our Step-by-Step Guide
4. Paying out of pocket
You don’t have to pick up another plan elsewhere when your health insurance ends. You’ll pay for health care costs at face value without going through any insurance protocols if that sounds of interest.
Pros: You only pay for what you need when you need it. Choosing this option might work for relatively healthy people who don’t have significant health concerns and work in low-risk industries.
Cons: Any costs associated with doctor visits, prescriptions, emergency or urgent care visits, and procedures are paid out-of-pocket, which you may not have accounted for in your budget. While you might not pay anything every month, you’ll pay full costs whenever something comes up.
5. Short-term health plans
These plans are exactly how they sound: they are short-term health plans that provide coverage for a short amount of time, from a couple of months to a year.
Pros: You don’t face any lapse in coverage when you leave one job and before you start another that has health insurance for employees. If you miss a special enrollment period, you can get this any time you need it. Just about everyone is eligible and qualifies. These plans tend to be cheaper than those in the marketplace.
Cons: These plans aren’t regulated the same way ACA plans are. Since minimum benefits aren’t required for recipients, you might miss essential coverage. That could be anything, such as a free annual wellness exam customarily covered by insurance through the ACA.
Related: Health Care Costs in Retirement: What to Expect
What to Consider With New Health Care Plans
Finding a new health care insurance plan isn’t easy or fun. If you’re exploring new options — or even considering keeping the one you have on COBRA — it’s essential to review your needs and options first. Ask yourself questions like:
— How healthy am I? If you don’t believe you go to the doctor a lot and don’t want to pay high health costs, you might want to find the least expensive plan available. You might consider dropping coverage altogether and paying for either a short-term health plan or out-of-pocket when something comes up. That way, you’re getting a plan based on your needs.
— What are the costs involved? It’s your deductible, copays, out-of-pocket maximum, and monthly premiums. These can add up, especially if you’re covering an entire family.
— Am I doing this alone? Suppose it’s only you who’s facing a health care insurance loss. You might be inclined to drop coverage and take a risk by not carrying health insurance. But if you’ve got a spouse or dependents on a health plan, consider how this will impact them.
— What are the risks involved? Not carrying insurance is costly, but carrying insurance is also an expensive line item in your budget. Remember this as you weigh your options to find the right plan for you.
Related: Are You Retirement-Ready? 10 Questions to Ask Yourself
Do you want to get serious about saving and planning for retirement? Sign up for Retire With Riley, Young and the Invested’s free retirement planning newsletter.
Related: How to Choose a Financial Advisor
Friends, family, and even social media can offer great advice about relationships, car maintenance, mac ‘n’ cheese recipes … but for financial advice, the data says you’re much better off seeking out a professional. But financial pros aren’t created equally—not only do they have different levels of ability, but they also have different qualifications and certifications, not to mention, they often boast different specialities that might or might not fit your personal needs.
So, if you want to know what to look for when you’re seeking out a seasoned money pro, look no further. Check out our guide to choosing a financial advisor.
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