Liz Weston: Unemployed in 2021? You are eligible for a no-premium health plan through the ACA
Dear Liz: My husband lost his job and we are on COBRA continuous coverage for our health insurance. We won’t have to pay the premiums until September 30, thanks to the US bailout, which was adopted in March. Is there anything we can enjoy on October 1 if my husband isn’t back to work?
I understand that there is currently a special enrollment period for Affordable Care Act coverage that ends August 15th. My husband’s 18-month COBRA coverage ends in December, but it’s very expensive and we’d like something cheaper.
Reply: You should both be allowed to switch to an Affordable Care Act policy after your free COBRA coverage ends.
COBRA allows people to extend their health insurance at work for up to 18 months after losing their job, but as you noted, the costs can be steep. COBRA coverage requires payment of the full premium that was once subsidized by the employer, plus administrative costs. ACA policies, on the other hand, are generally subsidized by tax credits that make coverage more affordable.
The American rescue plan obliges employers to pay COBRA premiums for former eligible employees from April to September. Employers will be reimbursed through a tax credit. (The grant can last for less than six months if a person’s COBRA eligibility ends before September or if they become eligible for group coverage through their employment or the employment of their spouse.) Upon termination coverage without premium, your husband would be eligible for an enrollment period that allows him to move to an Affordable Care Act policy.
Dear Liz: I have a credit score of 780, but I noticed that one of my cards does not count towards the percentage of credit used. I have had this card for 44 years and could charge a few hundred thousand dollars on a single purchase if I chose to, but the credit scoring formulas are not included in Amex’s “credit at hand”. Does that sound unfair?
Reply: Since credit cards with six-digit limits are rare, what you are describing is probably a charge card. Unlike credit cards, charge cards do not have preset spending limits. They also don’t allow you to carry a balance from month to month, usually.
The “percentage of credit used” that you mention is called credit utilization, and it is an important factor in credit scoring formulas. Credit Usage is a measure of the amount of available credit you use, and the larger the gap between your credit limits and your balances, the better.
But the credit usage calculation cannot be done if one of the digits – the credit limit – is missing. The only way for the formulas to calculate credit usage in this case would be to assume that the amount you charged equals your credit limit, which would be disastrous for your scores.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions can be directed to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.