Changing Jobs? Check the Impact to Your Medical Benefits

Wish I Knew Before
changing jobs, HSA, FSA, health benefits, job benefits
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Updated as of 2/22/22

If you’re changing jobs, don’t forget to think about how to coordinate your benefits between the two jobs, so that:

  1. you’re not without coverage between the two 
  2. you maximize your benefits
  3. you minimize any forfeits in FSAs
  4. you coordinate your HSA contributions and providers

(If you’re wanting to compare plans at your new job, check this post on health insurance plan comparison spreadsheets.)

Below are the main things that I’ve learned to check during job changes:

Fill the insurance gap between jobs

  • If you and your partner are each insured through different employers, then whoever is losing insurance is considered to be having a qualifying event – which means the remaining insured partner will be able to enroll you into their insurance plan regardless of the time of year.
  • When leaving your job, make sure you know how long your benefits will last. Check if all benefits will extend through the end of the month or if they cease immediately on resignation. Apparently, this can vary by employer. 
  • If you are ending a job and starting another job in the same month, you may not have any gap in coverage. Confirm with the benefits providers in each job about the termination date of the coverage in the current job with the effective date of your benefits coverage in your new job.
  • If there is a coverage gap of any amount of days, it’s always safest to buy some sort of coverage for those days. You will have to do a cost risk analysis on your own situation. You have 3 main options:
    • COBRA insurance, which is pretty much an extension of your current coverage except that your employer no long pays for any of it, so it is usually very expensive. 
    • Short term insurance – which can vary in cost but is usually the cheapest option, because it is essentially catastrophic insurance, to minimize the financial impact if you were to unexpectedly have any major medical costs during your gap days. Remember to always review the insurance terms in detail as these plans all have different levels of coverage, too.
    • Standard health insurance, including Affordable Care Act (ACA) plans – the cost of these plans are usually less than COBRA costs, but more than short term plans. However, you should always check all the costs before selecting. 

Your age, your family size, your medical needs, your risk threshold, and expected duration of time between jobs will determine the best choice for you. 

Maximize Your Benefits

Timing of routine, preventative services 

If you will have any sort of gap between coverage, it’s always safest to take advantage of any preventative doctor or dental visits before your coverage ends. This minimizes the likelihood of your needing to pay out of pocket for routine checks. 

Timing of non-covered benefits 

Conversely, if you are close to changing plans and haven’t met your deductible, then you may be better off delaying (if possible) costs that could contribute to your new deductible rather than your old one which you most likely won’t meet at the end of your current coverage. 

Timing of benefits that are capped

If you have any benefits where only a certain amount is covered per plan or plan year, then you may want to use them before switching. For example, vision plans often cover $150 per year in contact lenses or glasses. Even if you don’t need the contact/glasses yet, you should stock up or you would just be losing $150. In your new job, you may have a new plan that provides another $150 to use – essentially giving you a $300 contacts/glasses benefit for that one year. 

Check the latest FSA and HSA rules

Finally, doublecheck the rules on your FSA and HSA – there are often updates to these rules. It’s no wonder that the FSA and HSA are often under-utilized by people because they can be such a pain to track. Always recheck the rules each time you change jobs to make sure you know the latest. In 2022, here are some things to know about the FSA and HSA when changing jobs.

Regular FSA during job change

Your FSA must be used up – they don’t transfer to the next employer, so you should spend it all before you leave. However, the medical FSA plan limit is per employer and not per year, so even if you maxed out with your first employer, you are eligible for the maximum amount again with your new employer ($2850 in 2022). 

HSA during job change

Your HSA funds are not impacted by changing jobs. Whatever you have is yours to keep and use as needed for qualified medical expenses. You can roll it over to another HSA provider or continue to use it through your existing provider. 

However, you do have to be careful about how much you contribute. The annual maximum amount per individual or family has to be pro-rated for each month that you are eligible to contribute (e.g. that you are enrolled in a high-deductible, HSA eligible plan). Therefore, if your new job provides HSA eligibility or no longer provides it, you will have to adjust your monthly contributions accordingly. This PDF from Benefit Strategies, LLC and this post on the Finance Buff provide helpful information on mid-year changes and HSA eligibility and contributions.

Also note that some employers contribute towards your HSA – these amounts count towards your annual HSA limits. Don’t forget to account for employer contributions when calculating how much you will contribute while still not exceeding the limit.

Limited-purpose FSA (LPFSA) during job change

This is the FSA that you’re allowed to have if you also elect the HSA and is only usable towards vision and dental expenses. Like the regular FSA, it must be used up when changing jobs – they don’t transfer to the next employer, so you should spend it all before you leave unless you feel like gifting your employer. However, again as with the medical FSA, your plan limit is per employer and not per year, so even if you maxed out with your first employer, you are eligible for the maximum amount again with your new employer ($2850 in 2022).

Dependent Care FSA during job change

Dependent care FSA – I found some conflicting answers on this one and basically, it is up to your employer. Some employers allow you to use your funds through the end of the plan year. Others will require that you use it up or forfeit it upon departure. You will have to check with your employer. In 2020-21, there were COVID-related changes to the dependent care FSA that you should definitely check on with your employer. In fact, after doing this research, I’ve decided to check these specific terms with any new employers, so I know what I’m getting into when I sign up for the dependent care FSA. By the way, don’t forget that dependent care FSA expenses can include after school care, summer camps, as well as family members who babysit for you!

Do you have other tips to share? Email me at wishiknewbefore20@gmail.com or add them to the comments below!

Resources

Filling in the gap

Maximizing benefits in all categories

HSA and mid-year changes

LPFSA

Dependent care FSA

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