If your Obamacare (Affordable Care Act) health insurance plan was canceled because you were too late paying your health insurance premiums, you need to understand what happens to your unpaid medical bills, your health insurance subsidy (if applicable), and your options for obtaining new health insurance coverage.
What Happens With Unpaid Medical Bills
There’s a grace period for overdue insurance premiums when you purchase your own coverage, but the length of the grace period depends on whether or not you’re receiving a premium tax credit (health insurance premium subsidy) to help you pay for the coverage you bought through an Affordable Care Act health insurance exchange.
If you’re receiving a premium tax credit and you’ve already paid your first monthly premium to effectuate your coverage, your grace period is 90 days. If not (in other words, if you’re paying full price, either through the exchange or directly through an insurance company), your grace period will generally only be one month.
Pre-ACA, 30-day grace periods were the norm. But the text of the ACA includes a requirement (see Section 1412(c)(2)(B)(iv)(II)) that insurers offer a 90-day grace period if a person is receiving premium tax credits.
If you don’t pay your past-due premiums by the end of the grace period, your coverage will be terminated. If you had a 90-day grace period, your coverage termination date will be retroactive to the end of the first month of your grace period. In other words, you’ll have received one free month of coverage—but note that when you file your taxes, you’ll have to pay back the premium subsidy that was paid on your behalf for that month.
If your grace period was only a month, your coverage will be terminated retroactively to the last date through which your coverage was paid up (ie, you do not get any free coverage).
Either way, there is a chance that you may have some medical bills bounce back to you unpaid by your former health plan. This happens if you received healthcare services while you were in your second or third month of being behind on paying your health insurance premium (if you were receiving a premium subsidy) or if you received healthcare services during the first month that your premium was late (if you were not receiving a premium subsidy).
If you’re receiving a premium subsidy and you fall behind on your premium payments, your health plan will place incoming claims on “pending” status once you’re more than 30 days late paying your health insurance premium.
Rather than processing and paying these claims, they’re put on hold while the insurance company waits to see if you catch up on your premium payments. If you don’t catch up, your health insurance will be canceled once you’re more than 90 days late. The cancellation will be retroactive to the end of the first month that your premiums were overdue.
Claims for health care you got while you were between 31 and 90 days late paying your premiums will be denied and the healthcare provider will expect you to pay them. Since the cancellation of your health insurance was retroactive to the date you became 31 days late, you’ll no longer be eligible for the discount your former health plan negotiated with your in-network provider. In effect, you were uninsured when you got that care. Your bill could be significantly higher without the network discount.
Similarly, if you’re not receiving a premium subsidy and you don’t pay your premium by the end of your grace period, your insurer will terminate your coverage back to the last day you were paid up, and any claims that you incurred during the month-long grace period will not be paid.
If you think this may happen to you, the worst thing you can do is nothing. Be proactive. Go to your healthcare provider before your health insurance is terminated and negotiate a deal. Some providers send overdue accounts to collection agencies, so failure to act could impact your credit score and make it harder to get credit in the future (medical debt is handled differently from other types of debt, but it can still affect your credit score, depending on the circumstances).
When you approach your provider about the unpaid bill, be honest about your situation. Many healthcare providers will negotiate payment plans because they’d rather be paid slowly than not be paid at all. Negotiating a payment plan may keep your bill out of the hands of a collection agency. If you received care from a large organization such as a hospital, ask about the availability of a self-pay discount or charity care.
Is There a Penalty for Being Uninsured?
From 2014 to 2018, there was a federal penalty for being uninsured. The penalty was based on your income and depended on the number of months you didn’t have health insurance coverage for at least one day.
The federal penalty was reduced to $0 as of 2019, so people who are uninsured are no longer subject to a penalty on their federal tax returns. But residents of Massachusetts, New Jersey, Rhode Island, California, and DC are subject to state-based penalties if they don’t have health insurance and aren’t eligible for an exemption from the state’s coverage requirement.
Options for Coverage After Your Plan Has Been Canceled
Losing your health insurance because you didn’t pay your premiums does not make you eligible for a special enrollment period on the health insurance exchange or outside of the exchange (ie, directly through an insurance company). You won’t be able to sign up for an Obamacare plan again until the next annual open enrollment period, unless you experience certain qualifying life events. Here are some other options for health insurance coverage in the meantime.
- Medicaid: The Medicaid program has strict income limits to qualify but allows enrollments all year long to those who qualify. The majority of the states have expanded Medicaid under the ACA, which means coverage is available to adults with household income up to 138% of the poverty level. And Medicaid eligibility is determined based on monthly income, as opposed to the annual income figures that are used to determine premium subsidy eligibility in the exchange. So if an income reduction was the reason you couldn’t pay your health insurance premium, you might find that you’re eligible for Medicaid based on your new, lower income. But in the dwindling minority of states that have not expanded Medicaid, it’s much more difficult for low-income adults to qualify for Medicaid (this is the case in 11 states as of the summer of 2021).
- Job-Based Health Insurance (Initial Enrollment Period): If you get a job that provides health insurance, you’re allowed to enroll during the initial enrollment period that occurs shortly after you start your employment and become eligible for coverage. Likewise, if your spouse gets a job that provides spousal or family health insurance, you’ll have the opportunity to sign up for coverage under their new job-based health insurance shortly after the start of employment. If you’re under 26 and one of your parents starts a new job that provides family health insurance benefits, you’ll be able to get coverage until you turn 26 under your parent’s new job-based plan.
- Job-Based Coverage (Special Enrollment Period): If you have a change in family status or another qualifying event, you may be eligible for a special enrollment period with your own or your spouse’s existing job-based health insurance plan even if you turned that health insurance down in the past. However, losing your Obamacare insurance because you didn’t pay the premium will not qualify you for a special enrollment period. Things like getting married, having a baby, or adopting a child, will make you eligible for a special enrollment period. Ask your employee benefits office for a comprehensive list of all qualifying events.
- Medicare: If you’re almost 65, Medicare may come to your rescue. If you, your spouse, or a former spouse has paid into the Medicare system through payroll or self-employment taxes for enough years to qualify, you’ll be eligible for Medicare when you turn 65 years old (even if you don’t have at least 10 years of work history, you’ll still be able to enroll in Medicare as long as you’ve been in the U.S. for at least five years—but with monthly premiums for Part A, rather than premium-free Part A).
- Short-Term Health Insurance: Anyone can buy short-term health insurance directly from a health insurance company or through an insurance agent. There is no open enrollment period; you may buy at any time. However, short-term health insurance plans don’t cover pre-existing conditions, don’t have to cover the ACA’s essential health benefits, and are allowed to use medical underwriting, which means they can reject your application based on your medical history (post-claims underwriting is also common among short-term health plans). Short-term health plans are available in most areas, but there are 11 states where no short-term plans are for sale, either because the state has banned them altogether or implemented regulations that are unappealing to short-term health insurers. In some of those states, fixed indemnity plans are available for purchase. These plans are not adequate to serve as a person’s only coverage, but they’re also better than nothing at all. If you find yourself in a situation where you have no other options, a fixed indemnity plan might provide a small amount of security (but read all the fine print so that you’re not surprised if and when you have a claim).
- Special Enrollment on Your Health Insurance Exchange (or off-exchange): While losing your Obamacare plan because you didn’t pay your premiums won’t trigger a special enrollment period on your health insurance exchange, other life changes may. If you’ve had a significant life change such as a change in family size, moving, or a dramatic change in your income level, check with your health insurance exchange to see if you’re qualified for a special enrollment period. Special enrollment periods are time-limited, and in many cases, you’re required to have had health insurance coverage for at least one day within the previous two months—so don’t delay. Most qualifying events will also allow you the option to purchase a plan outside the exchange (directly from an insurance company), but premium subsidies and cost-sharing reductions are not available outside the exchange, so you’ll pay full price for your coverage if you go this route.
- Next Year’s Open Enrollment Period: Each autumn, there’s an open enrollment period for individual market health insurance (both on- and off-exchange), during which you can enroll in any plan that’s available in your area. It’s important to understand, however, that a rule that was implemented in 2017 allows an insurer to require an applicant to pay past-due premiums that were incurred within the previous 12 months, before allowing that applicant to re-enroll in a plan for the coming year. The most a person in this situation would owe is one month of past-due premiums, because coverage would have been retroactively terminated back to the end of the first month of the grace period (assuming the person was receiving premium subsidies). But it’s important for applicants to be aware of the possibility of having to repay past-due premiums before re-enrolling, especially in areas where there is only one insurer offering plans in the individual market.
Under the Biden administration, HHS has noted that they are reviewing the rules for how past-due premiums are handled when a person applies for a new policy, and may readdress it in the updated rules for 2023 and beyond.