How to Find Affordable Health Coverage When Laid Off

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If you have been laid off, you may be worried about losing your employer-based benefits, particularly health insurance. Having no health insurance can be an unsettling experience, especially if your employer health plan provides coverage for a partner or children as well. Fortunately, you have a number of options to remain insured for some period of time following your layoff.

It is important to try and find some type of health insurance plan during your period of unemployment. While going without health insurance may seem cost-effective when you have reduced income or no income, an unforeseen illness can be a large expense. The leading cause of personal bankruptcy in the United States is illness and medical bills.

Below, we'll describe several potential avenues for obtaining coverage after you're laid off. But one of the most important, which is available in most states if your household income has dropped below 138% of the poverty level, is Medicaid. This is described below in more detail, but if you've lost your income it should be the first option you check, as it's available at no cost in most states to cover you during the time while you're unemployed.

Join Your Spouse's Health Insurance

If you have a spouse whose employer provides health insurance and allows employees' spouses to enroll in coverage, joining their plan may be the most cost-effective option. Assuming the plan offers coverage to spouses, you'll be able to enroll—regardless of what time of year it is—when your old coverage ends, with a special enrollment period triggered by the loss of coverage.

Likewise, if your spouse or partner declined their health insurance benefit because they were under your plan, they can enroll in their employer's plan (with you on the plan as well, assuming spousal coverage is available) if you have been laid off. The same qualifying event (loss of other coverage) applies in both cases, creating a special enrollment period that allows for the initiation of coverage outside of normal open enrollment.

If you are able to use your spouse or partner’s health insurance, make sure to apply within 30 days of losing your previous coverage. Employer-sponsored health insurance plans may not accept your enrollment if it is submitted after that time (that's the minimum requirement under federal rules; some employers offer longer windows, but most do not).

COBRA or State Continuation

If your former employer has 20 or more employees, the company is required by a 1986 federal law to offer you the option to pay for an extension of your health insurance coverage for at least 18 months. This law is known the Consolidated Omnibus Budget Reconciliation Act, better known as COBRA.

At the time you are laid off, your employer must inform you in writing about your rights under COBRA. You then have 60 days from the date of the notice or the date your health insurance ended to enroll or sign up for coverage under COBRA. However, if your company went out of business or went bankrupt, COBRA insurance will not be available to you.

When you sign up for COBRA, you will continue to have the same health insurance that you had while employed. However, you must pay the health insurance premium that your former employer was paying for you, in addition to the premiums you were previously paying via payroll deduction. There is also an additional 2% administrative fee.

COBRA can be very expensive. Many laid-off workers who are eligible to continue their health insurance coverage through COBRA cannot afford to do so. The 70% or more of the premium that employers usually pay on behalf of employees becomes your responsibility if you elect COBRA. For a sense of the expense: Total annual premiums for family and single coverage averaged $21,342 and $7,470, respectively, in 2020.

COBRA is regulated by the U.S. Department of Labor. The department’s website has a list of frequently asked questions about COBRA. You also can call 866-444-3272 for information or assistance.

If your employer had fewer than 20 employees, you may be eligible to continue your employer-sponsored coverage for at least a few months under state continuation laws (aka "mini COBRA"). The same general idea applies: For the duration of the time you keep the coverage, you'll pay the full premiums on your own, plus an administrative fee. State continuation rules, which vary considerably from one state to another, are overseen by each state's insurance department. You can find your state's insurance department contact information by clicking on your state on this map.

Private Individual/Family Health Insurance

You can buy health insurance through the exchange in your state, directly from a health insurance company (such as Blue Cross or Cigna), or through an insurance broker who represents multiple insurance companies.

Note that although off-exchange major medical plans are fully compliant with the Affordable Care Act (Obamacare), the exchange is the only option that offers premium subsidies and cost-sharing subsidies.

Starting in 2014, individual health insurance in every state became guaranteed-issue; insurers are no longer allowed to impose any pre-existing condition limitations. This was a provision of the Affordable Care Act.

Enrollment in individual/family health plans is limited to an annual open enrollment period (just like employer-sponsored coverage) but you can enroll at any point during the year if you experience a qualifying event that triggers a special enrollment period. Loss of an employer-sponsored plan is considered a qualifying event, even if you have access to COBRA.

You can decline COBRA and enroll in an individual market plan (on or off the exchange), but you must do so within 60 days of losing your employer-sponsored plan. If you wait longer than that, your special enrollment period will be over, and you'll have to wait until the following open enrollment period.

Comparing Individual/Family Health Plans

Health insurance companies vary in what type of health plans they offer and you may be able to save money by shopping around.

You can easily compare premiums and health benefits online, especially if you use the exchange website (start at HealthCare.gov, and it will direct you to the applicable site if your state runs its own enrollment platform).

Consider consulting with a licensed insurance broker who may be able to help you find a health insurance plan that is less expensive than COBRA and still fits your needs.

You'll want to make sure that the broker is licensed with the exchange in your state so they can help you enroll via the exchange if your income would make you eligible for subsidies to offset the cost of your coverage, and possibly your out-of-pocket costs

Short-Term Health Insurance Coverage

Short-term health insurance policies, also known as temporary insurance, are designed to provide you with some level of health coverage for a limited period of time.

Many of these plans cover health-related emergencies, including hospital stays, but they often do not cover things like prescription drugs, maternity care, or mental health care.

Federal rules enacted in 2018 allow short-term plans to have initial terms of up to 364 days, and a total duration (including renewals) of up to 36 months. States can still impose their own (stricter) rules, so regulations vary considerably from one state to another.

For people who aren't eligible for premium subsidies in the exchange, short-term plans are much less expensive than regular health insurance. But short-term plans have a number of important limitations, including no coverage for pre-existing conditions and routine health care, high deductibles and out-of-pocket expenses, and limited benefit caps, as well as various essential health benefits that just aren't covered at all.

A short-term health insurance policy may be appropriate for you if you have a healthy lifestyle, have no existing medical conditions, and expect to be reemployed or able to purchase regular health insurance before the end of the temporary coverage period.

Note that a short-term plan is not considered minimum essential coverage under the ACA.

Low-Cost or Free Options

If these health insurance options are not within financial reach, there are programs and resources you can access for low-cost or free care or coverage.

Medicaid Expansion

One important program is Medicaid Expansion. Under the ACA, states can expand Medicaid eligibility to those with a household income below 138% of the federal poverty level. Some states have different limits, but it is worth seeing you you qualify based on your income due to job loss.

Children's Insurance

If your family income is below a certain level, your children (under age 19) may be eligible for a free or low-cost health insurance policy, either through Medicaid or the Children's Health Insurance Program.

These policies, provided by the federal government and your state, cover all basic children's health services including dental and vision care.

For information, contact your state's Department of Health or Department of Children and Family Services.

Community Health Centers

Regulated by the federal government, community health centers can be found in many parts of the country.

These clinics provide care to people without health insurance and have sliding fee scales based on income. Many of these clinics have counseling services to help people find health insurance or low-cost care.

Free Clinics

Located in many communities, free clinics provide health care for free or very little cost to uninsured people. They are often staffed by volunteer physicians and nurses and depend on donations from the local community.

Veterans Benefits

The Department of Veterans Administration (VA) offers free or low-cost medical care and prescription drug coverage to eligible veterans through its VA medical facilities.

Take Care of Yourself

Losing your job, your income, and your health benefits is undoubtedly stressful and, for many people, a blow to their self-esteem. One of the most important things you should do is acknowledge this and take care of yourself.

  • Be proactive about finding health insurance coverage as well as looking for a new job.
  • Stay connected with family and friends.
  • Find a local support group of others who have been laid off.
  • Talk to your doctor about your layoff and health insurance situation. They may be able to suggest some cost-saving measures such as switching your brand-name medications to generic versions or working out a payment plan for your medical bills.

And, most importantly, maintain a healthy lifestyle with regular exercise and good eating habits. Not only will you feel better physically and mentally, but you will be less likely to need health services.

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Article Sources
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