Is there a health insurance grace period between jobs? Yes there is. Actually, there are, in effect, two of them. That’s actually good news to you as a job seeker.
The COBRA health insurance grace period between jobs
After you leave one job and take another one, you have 30 days to decide whether you’re going to buy COBRA. If you end up not needing it, you have the choice to not buy it.
This is the reason why your COBRA paperwork usually takes a while to show up. Your former employer may be dragging its feet, but it won’t actually hurt you.
I have written about COBRA in greater depth before. COBRA can be a source of a tremendous amount of stress, and it doesn’t need to be.
The Affordable Care Act health insurance grace period between jobs
There are a tremendous number of misconceptions about the Affordable Care Act, a.k.a. Obamacare. Many people are worried about the tax penalties of not having coverage.
While there isn’t an explicit grace period in the ACA, you can go without coverage for a period of two months without a tax penalty. That protects you in the worst-case scenario, where bad timing can cause a gap of nearly two months. Or, in the more common scenario of a gap of about a month, it means you can change jobs twice in a year, forego COBRA, and still be OK.
If you change jobs more than twice in a year, which can happen–I had a year like that once–either get COBRA the third time or sign up for a plan in one of the health exchanges to avoid the tax penalty. You can use one of the cheap bronze plans to save money, as a bronze plan will almost certainly be cheaper than COBRA.
It’s also possible that the tax penalty will be lower than the cost of a bronze plan for a month or two. Contact a tax professional for advice in that case.
I’ve talked about that and other slightly unconventional options for health coverage in between jobs that you might consider as well. It is possible to make health care a bit more affordable during those times you employer isn’t subsidizing it, without neglecting yourself. There’s no point in having a health insurance grace period between jobs if you’re too scared to use it.