A Timely Client Life Event: Job Layoffs

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From big tech company layoffs to the Writers Guild strike, thousands of Americans have lost jobs this year. If your client has been laid off and received health insurance through their employer, they might wonder, "What do I do now?" They may feel anxious because the only insurance they've ever had has been through an employer, and they're unaware or unsure about other options. The good news is that you, the financial advisor, can provide them with an action plan and some relief by guiding them through their healthcare coverage options. To help you do that, we’re going to go over what those health insurance options are below!

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The Marketplace

The “Marketplace” or “Exchange” is an online platform where individuals and families can shop for and enroll in health insurance plans that are Affordable Care Act-compliant. Insurance plans offered through the Marketplace must be qualified health plans, meaning the plans must be offered by a state-licensed health insurance issuer and meet certain standard requirements. For example, plans must guarantee ten essential health benefits, which include prescription drugs, emergency services, and maternity care. Most importantly, when enrolling in a qualified plan, the only criteria that can be used to determine your coverage eligibility are your age, your sex, and your smoking status. You cannot be denied for pre-existing conditions, which is still a big misconception today, along with clients thinking they don’t “qualify” based on their income while there is no income requirement to enroll.

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Typically the only time you can enroll in a Marketplace plan is during Open Enrollment, but the loss of a job qualifies for a Special Enrollment Period. Another reason a Marketplace plan is a great option for healthcare coverage is because of Premium tax credits. Premium tax credits (PTCs) are a type of sliding scale subsidy that reduces the amount clients pay monthly for individual or family health plans purchased through the Marketplace. The American Rescue Plan Act of 2021 was signed by President Biden on March 11, 2021, and allowed, for the first time, individuals with annual income 400% above the FPL to be eligible for APTC. States such as California, Massachusetts, New Jersey, and Vermont have enacted state-level subsidies that help out specific populations, too. Currently, the expansion will last until 2025. To be eligible, clients must be enrolled through a Marketplace plan, have U.S. citizenship or legal residency, file federal income tax returns, and must not qualify for other programs such as Medicaid and Medicare.

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COBRA

COBRA (the Consolidated Omnibus Budget Reconciliation Act) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods under certain circumstances — most commonly, involuntary job loss. This coverage usually extends for 18 months. That means that if your client anticipates it will take longer than 18 months to get a new job with health insurance, they’ll need to find other coverage at the end of those 18 months.

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COBRA is a great option for anyone who wants to keep their exact same coverage, but the caveat is that it’s expensive. This is because your client pays the entire premium (plus a 2% administration fee) whereas before, their employer likely paid a portion of their monthly costs. It may be less expensive, however, than a Marketplace plan in the case of family coverage, but often isn’t for a single individual. This can also be a good option if your client anticipates that they will secure new employment with health coverage quickly, or if they’ve already significantly contributed towards their deductible and/or out-of-pocket maximum.

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Spouse’s Employer-Sponsored Health Insurance

If your client is married and their spouse has employer-sponsored health insurance, they might be able to join their spouse's plan. Loss of coverage is considered a trigger for special enrollment periods so, if properly planned, gaps in coverage can be avoided. However, many employers don’t subsidize the premiums for spousal coverage, and not all employers offer coverage for anyone other than the employee. This is especially true for smaller employers. But, if this is an option, evaluating provider networks, fixed costs, and maximum exposure is an important analysis to undertake. Joining their spouse’s employer-sponsored health coverage is also a good option for anyone who will experience less disruption to their provider network/relationships than if they chose a Marketplace plan.

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Final Thoughts

Layoffs can greatly impact your client's overall financial plan, especially if it takes them a while to find new employment. It disrupts their income, can force them to dip into their hard-earned savings, and can cause a great deal of anxiety. As a financial advisor, it’s your responsibility to ensure their financial plan and goals are disrupted as little as possible. But a way to go above and beyond, and ensure your client stays with you for years to come, is to also help relieve any anxiety and stress they feel after being laid off from their job. One of the ways to reduce anxiety and serve clients in a truly comprehensive way is to help them identify which healthcare coverage option makes the most sense for them while they’re unemployed. Doing so will not only ensure your client has one less thing to worry about but will also create a more accurate, comprehensive financial plan.

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