Q: My health insurance carrier has informed me that my policy is being terminated on December 31. I’ve heard that I’m therefore exempt from the individual mandate. Is that true?
A. Yes, but only temporarily. If your policy is cancelled because it doesn’t meet ACA requirements, you’ll qualify for a hardship exemption from the individual mandate penalty in 2016.
The hardship exemption will also allow you to purchase a catastrophic plan regardless of your age or income if your existing plan is being cancelled. But that might not be the best option for you, especially if you’re eligible for subsidies in the exchange based on your income. Subsidies are not available for catastrophic plans, which means that people who are eligible for subsidies will almost certainly be better off selecting a subsidy-eligible metal plan instead.
At the end of 2015, all grandmothered plans in Oregon and Colorado will be terminated. In other states that have allowed grandmothered plans, carriers have the option of terminating them, although they’re not required to do so at this point. But if your non-ACA-compliant plan is terminated, you’ll be eligible for a hardship exemption from the ACA’s individual mandate in 2016. You’ll need to get the exemption from your exchange. If you’re in one of the 38 states that use Healthcare.gov, you can download an exemption application here. If you’re in a state that runs its own exchange, contact the exchange in your state.
For people whose non-ACA-compliant coverage is terminated, the exemption from the ACA penalty (and the option to purchase a catastrophic plan) was originally issued in December 2013. The exemption can be obtained through October 1, 2016, but will no longer be issued after that point.
CMS confirmed that if your coverage is terminated at the end of 2015 and you obtain a hardship exemption as a result, it will be valid for the entire 2016 calendar year. That means you would not be subject to the penalty in 2016, and you would be eligible to keep a catastrophic plan for the entire 2016 calendar year.
But choosing to go without insurance next year is a very risky option. If you do not enroll in coverage by January 31 (or February 29 if you use a special enrollment period, described below), you will be without coverage until 2017 unless you have a qualifying event during the year (a change in health status does not count as a qualifying event, so you would not be able to enroll in a plan if you find yourself needing healthcare in the coming year). The next open enrollment is tentatively scheduled to begin November 1, 2016, for coverage effective January 2017. Keep this in mind if you opt for the hardship exemption.
Many people whose plans are being cancelled are finding that they qualify for an exchange subsidy that makes their new coverage more affordable than they were expecting. A family of four is eligible for subsidies with an income up to $97,000 in 2016. So before you apply for an exemption, make sure you shop around for coverage. You may find that the available options offer better coverage and a lower premium than you were expecting.
Also, note that if your coverage is being terminated at the end of 2015, you’re eligible for a special enrollment period (triggered by loss of other coverage) that will overlap with the general open enrollment period. As long as you indicate that you’re using a special enrollment period as a result of losing coverage, you’ll be able to enroll anytime until December 31 and still get a January 1 effective date. Your special enrollment period will also extend for 60 days after the date your coverage ends, which means you’d be able to enroll in a new plan in January or February and have coverage for the remainder of the year. Open enrollment ends on January 31, so the special enrollment period triggered by loss of other coverage gives you another month to select a plan (although coverage is not backdated – if you enroll in January, you’ll have coverage starting in February, and if you enroll in February, you’ll have coverage starting in March).