The risk of financial uncertainty due to a serious illness or injury is something that all career breakers need to consider. While I don’t think it’s likely to happen, I think it’s possible to go bankrupt during a career break due to the inability to pay high medical bills. So it’s very important to consider a health insurance plan.
With that being said, I think there are scenarios where carrying health insurance isn’t really necessary or cost effective. It all depends on you and your own personal situation. And it’s important to not let fear get in the way of your dreams of a sabbatical.
In this post, I’m will talk about the options for health insurance during a career break and the approximate costs. Then I’ll discuss the likely scenarios where health insurance would be beneficial and the odds of actually using it. Finally, I’ll talk about who should consider continuing health insurance during a career break and who could go without.
What are your health insurance options while gone?
Fortunately, Americans now have options for health insurance, outside the plans offered by employers, thanks to the Affordable Care Act. These plans aren’t the best options out there, but they will protect you from the financial burden of a big medical bill. So let’s take a look at what your options are for health insurance during a career break.
1. Continue your health insurance through your employer.
If you get a leave of absence approved by your employer, then it’s possible to continue your health insurance. Even if you quit your job, this may be an option. The Consolidated Omnibus Budget Reconciliation Act (also known as COBRA) requires employers to allow former employees to continue their health insurance, usually at full cost or at a discounted group rate. It’s important to research whether this is an option for you with your current or former employer. Call your benefits office and ask them whether you can continue your coverage under COBRA.
The pros of continuing your coverage through your employer are that you keep the same insurance and the same providers. There is no change in your coverage. These plans tend to have the best coverage as well: the biggest networks, the lowest copays, and the lowest deductibles.
The biggest con is that your premiums will increase a lot since your employer will no longer subsidize the insurance. So you will pay the highest monthly prices for this insurance.
2. Use your spouse’s health insurance.
If you are married, then it’s certainly possible to use your spouse’s health insurance during a career break. If you both want to leave your jobs for awhile, then you could stagger your breaks. Take turns working and carrying the insurance policy while your spouse takes the time off.
3. Buy health insurance on healthcare.gov.
The Affordable Care Act of 2010 created a health insurance marketplace where Americans can obtain affordable health insurance. For many career breakers, this is the best option. There are many plans to choose from with varying costs and coverage levels. You will need to research ahead of time to determine what plan would work best for you.
The pros of health insurance obtained through healthcare.gov are that it’s easy to obtain coverage, the monthly premiums are lower than health insurance through COBRA, and you can get coverage even if you have a preexisting condition. These plans will protect you from going bankrupt due to a serious illness or injury during your career break.
The biggest con is that the coverage is usually not the best. You will likely have high copays and deductibles. The networks of doctors, hospitals, and pharmacies might be really small. And the cheaper insurance plans might only work in your state of residence. So if you get sick or injured in a different state, then you can’t use your health insurance.
4. Get catastrophic coverage if you are under the age of 30.
Healthcare.gov offers catastrophic coverage plans which have really low premiums but really high deductibles ($7900 in 2019). The caveat though is you need a hardship exemption to qualify for one of these plans. For many career breakers, none of these hardship exemptions will apply, so qualifying for one of these plans will be difficult. It doesn’t hurt to look at these plans though and see if you would be eligible. It might be a really good, affordable option for you.
How much does health insurance cost?
When looking at the costs of health insurance, it’s important to look at two different aspects: the monthly costs of premiums and the total possible out of pocket expenses per year. The main reason is for budgeting purposes. You need to have money saved to cover ALL of your potential health costs during a career break.
The monthly costs of the premiums are factored into your total career break costs so you need to save the money ahead of time to cover this monthly bill. The total possible out of pocket expenses should be factored into a separate emergency fund, which is money you save above and beyond your Year Off costs. You need to evaluate your health insurance plan and figure out how much money you would have to pay if you got seriously sick or injured. Then you need to have AT LEAST that amount of money saved in your emergency fund.
According to ehealthinsurance.com, the average monthly premium for individual coverage for a healthcare.gov health insurance plan is $440. That’s $5,280 for a whole year of coverage. The average annual deductible was $4,578 and the average yearly out-of-pocket expense was $7,900. So you should budget $5,280 into your Year Off budget and $7,900 in your emergency fund. That way you know you have enough money to pay for treatment if you get seriously injured or ill.
The costs for continuing health insurance through COBRA is likely to be higher since the coverage is probably better. You can find out how much that would cost by calling your benefits department.
No matter what insurance plan you choose, it’s going to cost a good amount of money. That’s why it’s important to consider not continuing your coverage (which I discuss in detail below).
When would you need health insurance during a career break?
A career breaker would use health insurance if he/she got sick or injured while traveling and had to return home for additional care. Travel insurance (which I consider a necessity) would cover all of the initial costs of care while away from home. It’s only upon the return home when health insurance would kick in.
Since travel insurance only covers medical emergencies that arise away from home, health insurance covers any emergencies that happen while at home. And it also covers treatment for any preexisting conditions since travel insurance does not cover preexisting conditions.
Important distinction: health insurance protects your assets, it does not protect your health and well-being.
It does not create a giant bubble around you protecting you from illness and injury. You still need to be careful with everything you do. Don’t mix drugs and alcohol with risky activities. Don’t be an idiot. Get out of your comfort zone as much as you can, but don’t do something that’s outside your physical capabilities.
What are the odds of using your health insurance during a career break?
If you have a preexisting condition, then the odds of using your health insurance is 100%.
So at that point, it becomes a cost-benefit analysis. If the amount of money that you will spend out-of-pocket WITHOUT insurance (doctor’s office visits, medications, tests) exceeds the amount of money that you will spend out-of-pocket WITH insurance (premiums, deductibles, co-pays), then it’s obviously best to continue your health insurance.
If your medical condition is mild and you only need occasional care and cheap medications, then it may be more cost effective to go without insurance and to pay for everything out of pocket. You will just need to budget for those costs up front and make sure you have the money set aside to pay for everything.
The older you are, the more likely you are to get sick. So your odds of using your health insurance increases as you age. The younger you are, the healthier you tend to be, so insurance may not be necessary. On the contrary, the younger you are, the more likely you are to participate in risky activities. This increases your chance of injury and using health insurance.
If you have NO preexisting conditions, then what are the odds of getting sick and injured and needing to return home for care?
Unfortunately, there is not much data out there on this, so there’s no way of knowing for sure. Most of the illnesses that young people encounter while traveling for a year are acute illnesses, not chronic. Travel insurance will cover the treatment of most of these illnesses.
The vast majority of injuries that occur while traveling are acute as well and will not need long-term care. So the odds of needing health insurance to cover any costs beyond what your travel insurance covers is pretty small. But the riskier the activities you partake in, the more likely you are to get injured and to need long-term care.
The main thing to protect yourself against are the catastrophic events that cost tens or hundreds of thousands of dollars. Although I don’t have any data to support this claim, I think the odds of that happening are very small.
Who should consider continuing health insurance during a career break?
There are several instances where I believe continuing health insurance is important.
If you have preexisting conditions and you know you have fixed healthcare costs, I think it’s best to carry insurance during your career break.
You know that you will use it, and you know that it is cost effective. So save up the extra money to cover your premiums, deductibles, and co-pays and carry a health insurance plan. Remember, travel insurance will not cover preexisting conditions.
If you have dependents, then I think it’s best to carry health insurance, even if you are all relatively healthy.
The more people you have to take care of, the more likely a large medical expense will occur. All it takes is one person in your family to get seriously injured or sick to create those catastrophic medical bills.
If you’re not traveling and spending your career break at home, then it’s best to continue your health insurance.
You cannot use travel insurance if you get sick or injured at home, so you need some protection against catastrophic medical bills.
If you are partaking in high risk activities that can lead to severe injuries that would need long-term care to treat, then continuing health insurance may be beneficial.
Activities like rock climbing, mountain biking, skiing, and other adventure activities will increase your likelihood of severe injury, so it’s worth considering additional insurance. Keep in mind, travel insurance may not cover your activity, and health insurance may exclude risky activities as well. And certain insurances only work in your home state. So it’s important to make sure the coverage extends to the states you travel through.
Some travelers like the peace of mind that having health insurance provides. If that’s you, then I think carrying health insurance is beneficial.
Who should consider NOT continuing health insurance during a career break?
If you are young, relatively healthy, and traveling during your career break and you have travel insurance (which I recommend no matter what), then I think it’s possible to go without health insurance. The only time you would need it is if you get seriously injured or sick while traveling and needed to come home for continuing care. Remember, your travel insurance will cover most, if not all, of the initial costs. The only costs your health insurance will cover are those you incur AFTER you return home.
If you are not participating in high-risk activities, then continuing health insurance is not cost effective. Your odds of needing to use it simply aren’t high enough.
The shorter your career break, the less likely you are to get sick or injured. So those taking a shorter career break really don’t need to carry health insurance either.
Keep this in mind…..you can always sign up for a plan if something bad happens.
Health insurances under the Affordable Care Act on healthcare.gov cannot deny coverage based on preexisting conditions. So if you have a bad accident, your travel insurance will cover the initial costs. Then, you can sign up for a health insurance plan for all of the continuing care. Remember though, the coverage likely won’t start until the beginning of the following month. You will pay full price for any care between when you arrive back home and when your insurance kicks in. And the plan you sign up for will likely have a high deductible so plan accordingly.
Preparing for and preventing the worst-case scenario.
What if you are disabled for a long time? Let’s say you break your back and you cannot work for an extended period. You will need the extra money to cover your health insurance and out of pocket costs. And you need to start thinking about returning to work when you are better. That’s why a leave of absence is so important, so you at least have the guarantee of a job when you are ready to return to work. Then you can get back to making money to cover your continuing healthcare costs.
A good start on retirement savings is important so you have money in case of an emergency. That money should be “untouchable” in your mind. But if a hardship withdrawal is absolutely necessary, then the option is there.
Practice the healthy habits of eating well and exercising regularly. Prevention is key so take it seriously. Many illnesses and injuries are highly preventable through proper preparation and healthy habits.
In conclusion, continuing health insurance during a career break all depends on your individual situation.
Some people should purchase it, while it’s possible for others to go without. Research ahead of time what your options are and go with what you think is best.
Most importantly, don’t let unnecessary fears prevent you from having the best year of your life. Be mindful of the potential consequences, but don’t fear them. Just prepare for them.
Additional Resources:
Why is travel insurance necessary?
How to apply for an Affordable Care Act health insurance plan.