People often overlook what happens to their health insurance coverage when they go on disability leave from work.
The Family Medical Leave Act (FMLA) and several state-level laws govern the issue. However, these rules apply to only about half of the working population, and the legal protections usually expire after twelve weeks.
First, you may want to know whether your employer can cancel your coverage when you cannot work. The answer is often yes – so finding options that cover needed medical care becomes critical.
Second, you might be curious about who pays the premiums. At a minimum, the after-tax cost of your usual obligation will rise. Once again, you may want to explore more affordable options.
Employer Canceling
The first thing that might happen to your health insurance when you go on disability is that your employer might cancel the coverage when they terminate your employment.
The Family Medical Leave Act (FMLA) requires employers to maintain group health coverage as if disabled employees are still working. But it covers only about half of all workers and lasts only twelve weeks. However, do not worry; you have three options to address the issue.
Marketplace
Your employer can cancel your group health insurance while you are on long-term disability. Fortunately, the government allows you to get new coverage in the online marketplace without delay.
See if you are eligible for immediate coverage. Loss of insurance is a qualifying life event, meaning you do not have to wait until the annual open enrollment to get started.
Your household income, which is lower now that you cannot work, determines your eligibility for two programs that could lower your costs.
- Medicaid covers low-income families with unique eligibility criteria and benefits in each state.
- Premium tax credits make premiums more affordable for private health insurance (silver plan).
COBRA
Because your employer can cancel your group health insurance while on disability, the government allows you to continue your coverage through COBRA.
However, because you pay up to 102% of the premiums yourself, the COBRA continuation coverage makes sense for only a tiny handful of affected individuals.
- You heavily utilize in-network specialists and cannot switch doctors
- Your spouse’s income is too high to qualify for subsidies or Medicaid
- Your spouse’s employer does not offer medical benefits
Spouse Employer
Your employer can cancel your group health insurance while on short-term disability; the government allows you to enroll in coverage at your spouse’s employer.
The qualifying life event rules apply to employer-sponsored plans as well. You can add yourself or your entire family to your spouse’s plan at work without waiting for their annual open enrollment period.
Be sure to make the switch within 60 days after the insurance loss. Also, your spouse’s employer may contribute towards the cost.
Who Pays Premiums
The other thing that might happen to your health insurance when you go on disability is that the party paying the premiums might change or stay the same.
Once again, FMLA and the related state-based statutes require employers to continue paying their share of the premiums. Still, the legal protections cover only half of all workers and end after twelve weeks for most people.
Short-Term Disability
The answer to who pays the current health insurance premiums during a short-term disability lasting twelve weeks or less depends on whether you qualify for legal protections under the relevant laws.
Ten states have medical leave laws that apply regionally and require employers to continue paying their share of premiums. These supplemental regulations might cover more workers or extend the length of legal protections.
The federal Family Medical Leave Act (FMLA) pertains nationwide.
- You must work for a covered employer
- You must be an eligible employee
Therefore, the best-case scenario is that you must pay your share of the health insurance premiums using after-tax dollars if one of these laws applies. If not, you might have to pay 100% of the costs with after-tax money.
Long-Term Disability
The affected person often pays health insurance premiums while on long-term disability. In most cases, the legal protections noted above end after twelve weeks, and employers no longer have a duty to contribute their share of the costs.
Job termination while on long-term disability is very common, which means that you could lose your health insurance at the same time. Fortunately, this change is a qualifying life event, giving you three options with unique cost considerations.
- 102% of the costs to switch to COBRA coverage after job termination
- No more than 8.5% of household income for a marketplace plan (silver)
- $0 for Medicaid is available to low-income families living in poverty
Social Security Disability
The federal government pays most health insurance premiums when you go on Social Security Disability Insurance (SSDI). However, you may have to wait two years to take advantage of this cost-saving measure.
SSDI recipients are eligible for Medicare after a 24-month qualifying period. However, your costs for this coverage will depend on the size of your benefit check and the options you choose.
- Part A (Hospital): $0
- Part B (Medical): $171.10 or higher based on income
- Part D (Prescription Drugs): Varies
Supplemental Security Income (SSI) recipients typically qualify for Medicaid. However, most people who get disability after working and paying FICA taxes receive SSDI, which delivers a higher monthly benefit.
