Guide to Managing Medical Benefits When You Leave or Start a Job

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Hey everyone, I’m Laura Adams and this is the money girl podcast where my mission is to help you live rich and love the journey. If you’re a longtime listener, you know that we cover a wide variety of topics here, it could be credit debt investing, real estate, business taxes, insurance, money management strategies, and lots more. And if you’re a new listener, I am thrilled that you are now part of this community.

And I hope that you’ll stick around by subscribing with so many people unemployed right now, or working fewer hours than they’d like, and maybe looking for different types of work that they can do from home. One question that keeps coming up is how to handle medical benefits in these transitions with the pandemic, still raging in many parts of the country, including my home state, Florida. This is not the time to be without health insurance.

So no matter if you quit your job, you get fired, you get furloughed, whatever happens, it’s essential to know your rights and your options so that you can make the most of the perks with the old employer and make the benefits that you can get in the individual marketplace work to your advantage.

So that’s what this show is all about. If having medical benefits is important to you, stick with me, you’re going to find the notes for each show and the full archive of podcasts in the money girl [email protected]. This is episode number 646 called your guide to managing medical benefits.

When you leave or start a job, as you know, leaving a job typically means also saying goodbye to workplace benefits. That could be health insurance, medical spending accounts, a whole suite of perks that you typically get when you work for medium or larger size companies.

And if you’re starting a new job with benefits or you’re becoming self-employed, you’re going to have some critical decisions to make about what’s best for you and your family. When it comes to choosing benefits, I recently received several questions about how to handle benefits during these transitions.

And I’m going to answer them throughout the show. We’ll review the best options for managing your medical benefits when you leave or start a new job. So when it’s time to go, when you realize that you’re going to be leaving job, whether it’s something that you decide, or whether you are just told out of the blue, that you are no longer needed, it is essential to understand what your rights are.

So if you, if you know that you’re leaving, make sure that you let your employer know ahead of time, so you can evaluate your options for managing or replacing all of your benefits. As soon as possible. The sooner you understand your choices, the more time you’re going to have to do your homework and consider what’s best for you and your family, any insurance perks that you typically have.

And on the last day of the month that you get terminated. So you want to be strategic about choosing your last day when that is possible. For instance, let’s say you work through November 30th, your insurance might end on November 30th, but if you work through December 1st, your insurance may last through December 31st. So that would give you a lot more time with your benefits. So that’s what I mean.

When I say BS, be strategic about your last day. Understand if you would get that full month, uh, after you’re terminated. Also remember that most things in business are negotiable. So if you leave an employer on good terms or maybe you’re fired, but you get a severance package, you want to ask for more time asked for an extra month or two of medical coverage, if you need it. And if that’s something important to you. So here are four scenarios that you may need to manage when it comes to work transitions.

The first one is you leave a job for a new employer with benefits. Well, congrats, the benefits at your new job. They could start on your very first day or some companies impose a waiting period. And that could be 30 days, 60 days, 90 days. I mean, it could even be six months just depending on the size of your employer.

Typically the larger the company, the more, you know, gracious they are with giving you benefits as soon as possible. If you do have a waiting period where you are going to be uninsured at the old job, and you’re going to have to wait a while to get medical benefits at the new job, don’t roll the dice with a gap in critical coverage, your health insurance, even your life insurance needs to continue. You know, something unexpected like a car accident, an illness or a death could happen, and it could be financially devastating for you or your surviving family.

We’re going to cover more about that. And the fourth scenario is that you leave a job and you become self-employed. So when you work for yourself, you are in charge. You have to provide your own medical benefits. And the same advice is going to apply to you. So keep listening. The first thing is that I want you to know about a critical right, that you should be familiar with. It’s called Cobra continuation coverage. So this is going to apply.

If you leave a job with where you had group health insurance Cobra stands for the consolidated omnibus budget reconciliation act. This is a law that requires an insurance company to continue your employer-sponsored medical insurance. And this includes health, dental, and vision policies after you’re no longer employed. So this is a really important benefit that you need to be aware of. If you leave group coverage, you can continue it through Cobra law.

Anytime you leave a job, you can purchase Cobra for a certain period. And your benefits. Administrators should give you information about your right to apply for Cobra coverage. You can purchase basically the same or fewer medical benefits that you had before you left your job. Before you got laid off before you got fired, whatever the situation was. But I have to say the price will not be the same.

Unfortunately, Cobra can be expensive because your previous employer does not subsidize it in a lot of cases. When you’re getting group coverage through your employer, they’re actually picking up a portion of your premium. You’re not paying the full premium in most cases. So for most people, when you figure out and you see what your Cobra premium is going to be, it may feel like a little bit of sticker shock because it’s going to be much higher than you’re used to.

And in a lot of cases, not only do you have to pay those premiums, but you have to pay an additional 2% administrative charge to the insurer for handling this for you. And while it may be more than you’re used to the upside is that your coverage will be seamless. It’s like, you know, you won’t skip a beat with your medical insurance and you’re going to be very familiar with it.

So if it’s something that you just need to get you through a few months, even though it’s more expensive, it may be well worth it compared to your other options. And kinda just depends on what your budget is and whether you want to spend a lot of time shopping around one important point about Cobra that you should understand is that it protects everyone affected by the loss of group health insurance. This includes the former employee, his or her spouse, former spouses and dependent children.

When certain qualifying events occur such as getting terminated or having a reduction in work hours, that means you lose your, your health insurance. Your coverage for Cobra typically lasts for up to 18 months. And if you are a surviving spouse or divorced from a covered employee, your Cobra coverage may actually last up to 36 months. So what’s important is that you should not make the mistake of thinking, well, I’ll just wait. Yeah. And get health insurance. When I get a new job or when I become eligible after a waiting period, new do not do that. If you get sick or you need a trip to the emergency room, yeah. You could end up with a massive bill. It is just not worth it. Especially these days with the pandemic. I mean, you could be in for, uh, some incredible bills. If you do end up in the hospital with COVID.

If you’re not eligible for regular federal Cobra, many States offer similar programs, they call it mini Cobra. And if you want to learn more, I would encourage you to check out your state’s department of insurance for more information about mini Cobra. Now, if you don’t have the option to get Cobra benefits or many Cobra benefits, or you can’t afford it, your next best option is to shop for an ACE. See a qualified individual health insurance policy. ACA stands for the affordable care act that sets certain standards for insurance. And these are known as essential health benefits, and it provides subsidies for those policies that can make them a lot more affordable. If you qualify for an ACA insurance subsidy, it’s based on your income and your family size, and it can definitely make a policy less expensive and Cobra continuation. But if you have high income and you’re not going to qualify for any reduced premiums, Cobra may cost you about the same or even give you better benefits for the month.

So my advice as always with insurance is shy and compare. You really are going to want to look at the cost of Cobra compared to a private policy when possible open enrollment for ACA qualified health plans is typically limited to the last you weeks of the year. However, if you lose your group coverage at work, that is one of several life events that qualify you for what’s called a special enrollment period or SEP that allows you to get coverage. But here’s the kicker. You only have 60 days to sign up for an ACA plan after losing your insurance at work. So you can’t put it off. You want to go ahead and begin that search, you know, as soon as possible, if you miss the special enrollment deadline, those 60 days, you generally will not be able to get an ACA plan unless you have another qualifying event.

And that might include getting married, having a child, or even exhausting your maximum period of Cobra coverage. If you have it, you can get quotes for an ACA qualified health plan. From a lot of different places. You can go directly to healthcare.gov. That’s the federal healthcare marketplace. If your state has its own healthcare marketplace, you can go directly to your state’s site. And these are going to be California, Colorado, Connecticut, the District of Columbia, Idaho, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, Vermont, or Washington. You can go to insurance aggregator sites, such as bankrate.com and you can go to insurance brokers. Uh, so there are a lot of different places where you can find an ACA qualified plan. I think certainly shopping online is the easiest way to do it.

And depending on your income, your family size, and the state where you live, you may qualify for free or low-cost coverage through Medicaid or through the children’s health insurance program, which is called chip. Also note that if you are younger than age 26, you can enroll in a parent’s health insurance plan. Even if you don’t live at home, even if you’re not a dependent, even if you’re married and you know, kind of have your own life, you can still enroll on their plan if they’ll have you. But once you reach your 26th birthday, you’re no longer eligible before I go on.

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Hi, Laura. My name is Jamie and I really enjoy your podcast. I am starting a new job soon, and I’m wondering whether or not I should elect to have vision medical benefits and dental benefits because I already have them under my husband’s insurance. So I was wondering if you could talk a little bit about how to stack those benefits, um, can they be used as a primary and a secondary and what the benefits would be of that, and also maybe a discussion about how to compare insurance policies when you need to choose between two different plans. Thank you. Bye

Jamie, thank you so much for your voicemail. You know, it’s not against the law to have more than one medical policy, one dental policy, but it may be a waste of money. Having more than one medical plan doesn’t mean that you get reimbursed twice for covered benefits. What happens is that the plan you get through your employer becomes your primary plan. And then the one you get through a spouse or partner, employer is secondary. After the primary policy covers you, the secondary would pick up any remaining covered costs, but the combined coverage can’t exceed 100% of the cost. When you have dual health plans or dual dental plans, you have to pay deductibles for both of them. So in other words, that means you may still have out of pocket costs, even if you have more than one policy. So whether you can save money or not, enrolling in more than one medical plan, depends on factors like what’s the premium, what’s the annual deductible, and how high your health care expenses could be in the future.

You’re going to need to make the same comparisons. If you’re just choosing between different plans, you know, you’re trying to choose it is the plan plans that my employer better, or the plans at my spouse’s employer better. You kind of are going to have to do a, try to do an apples to apple comparison, evaluate the monthly premiums, annual deductibles, copayments co-insurance, and also look at the doctor networks. All of those things are going to go into which one is best for your situation. If you’re having trouble doing that comparison, I would encourage you to speak to an insurance representative from each of the plans that you’re considering, ask them about the types of healthcare services you and your family typically need or have needed in the past. You can’t predict how healthy you’re going to be going forward. You know, you just have to evaluate your previous expenses, health, dental, and vision care in order to choose what’s best or to choose between different plans and to know of having more than one policy is worthwhile.

So, unfortunately, there’s no kind of rule of thumb there. It really just depends on the types of expenses that you typically have, and what’s going to be covered by each different plan. It’s not an easy comparison to make. Um, so, you know, again, ask for help if you need it. I got another question from Adam who asks my employer to make contributions to my HSA every payday. Do I have to repay them if I leave my job to start my own business? Thanks for that question. Adam, another insurance-related benefit that you may have at work is a health savings account or HSA. And you’ve probably heard me talk about HSS. On previous shows, you are eligible for an HSA when you’re enrolled in a high deductible health plan, having a high deductible health plan might be a good option for you. You know, it can lower your premiums.

And it’s good when you’re in relatively good health and you’re likely to take advantage of an HSA. And the good news, Adam is that an HSA is portable. So that means you can take it with you if you leave an employer. And that means you take the whole thing. You don’t have to give any part of it back. Your account balance, including amounts contributed by your old employer, is yours to spend on eligible medical expenses with no spending deadline. You can spend an HSA on qualified expenses for you or for your family members. And you know, you can even spend it after you don’t have a high deductible health plan anymore, or you become uninsured. However, if you don’t have that high deductible health plan, you cannot make any new contributions to your HSA. You can spend it down, but you just can’t make new contributions and a great way to spend HSA money.

That a lot of people overlook is that if you become unemployed, you can use your HSA money to pay for Cobra. So that’s a great way to spend it. If you’ve got a balance that you saved up, or you can spend it on the cost of other health insurance premiums like your ACA qualified plans if you’re receiving unemployment compensation. But it’s important to know that if you spend HSA money on non-qualified expenses like I don’t know, groceries or gas, those amounts will be taxed as income. Plus you’ll have to pay an additional 20% penalty. So leave those funds in the HSA until you’ve got qualified expenses. And you know, if you qualify for an HSA and let’s say you get one, you’re getting one through your employer and you want to change the bank that you use. You can do that. You can transfer funds, you can do a rollover, one HSA into a different HSA account.

You can get an HSA at a whole lot of banks, credit unions, brokerages, specialty institutions. They are very similar to a checking account. They give you paper checks, a debit card, online banking, all that good stuff. And a lot of you downloaded my HSA cheat sheet a few weeks ago, and that’s still available. If you want to review the HSA rules, you can download this one-page guide. It summarizes all of the rules and it’s updated for 2020. And to get that free PDF, all you have to do is text H S a tool with no space HSA tool to the number three, three, four, four, four, and you can instantly download this HSA cheat sheet. I think it will help you understand the benefits and how you can use an HSA wisely. Now, what about an FSA? A lot of you may have that at a job that you are leaving.

This is another medical spending account. These accounts can only be offered by employers and they are not portable. Okay? So you cannot take an FSA with you to spend personally, or even roll over into another FSA. This is the problem with, with FSA funds, they are using it or lose it, which means the amounts that you’ve contributed are going to be forfeited. You’re actually gonna lose that money if you don’t spend them before leaving a job. So make sure you empty your FSA account by spending it on qualified purchases either before your last day of work, or it could be by the end of that same month, you’ll want to find out from your benefits administrator. What’s your deadline is for spending those funds. Whether it leaving a job is caused for tears or celebration with a little bit of planning, you can definitely make smart decisions about your medical benefits and hopefully, save some money.

Thank you to Jamie and Adam for submitting your questions. If you have a money question or a dilemma that you’re trying to work out, I would love to hear from you. One option is to join our private Facebook group called dominate your dollars to request your invitation. You can find dominate your dollars on Facebook, or you can send me a text message for immediate access. Just text the word dollars. D O L L A R S to that same number three, three, four, four, four. I hope to see you in the group. And you can also visit Laura D adams.com to email me your money question or suggestion for a future show. And you can even record a voice message just like Jamie did call (302) 364-0308. To leave your message that’s all for now. I’ll talk to you next week until then here’s to living a richer life. Money girl is produced by the audio wizard, Steve Ricky Berg with editorial support from Karen Hertzberg. If you’ve been enjoying the podcast, it means a lot to us. When you take a moment to rate and review it on Apple Podcasts, that’s an easy free way to give back, show your support and help new listeners find us. You might also like the backlist episodes and show notes that are always [email protected]