If you have a health plan in the individual market, you can probably just let it auto-renew for the coming year without doing anything during open enrollment. But this is generally not in your best interest. | Image: bnenin/stock.adobe.com
- In most states, you can’t pick a new plan after December 15.
- Your premium subsidy might change (maybe by a lot) in 2021, so pay close attention to how your after-subsidy premiums will change.
- If your premiums are subsidized, auto-renewal could result in a higher premium if subsidies are declining in your area.
- You may be eligible for auto-renewal, but without your premium subsidy.
- If you bought off-exchange or still have a pre-ACA plan, consider an on-exchange plan for 2021.
If you have a health plan in the individual market, on-exchange or off-exchange, you can probably just let it renew for the coming year without doing anything during open enrollment. But this is generally not in your best interest. It’s much better to actively compare the available plans during open enrollment (November 1 to December 15 in most states).
You might decide to renew your existing coverage, or you might end up switching to a different plan. But one of the reasons the ACA’s health insurance exchanges were created was to foster a sense of competition and choice, and to encourage Americans to comparison shop for their health coverage. You can’t do that if you passively let your current coverage auto-renew.
When does auto-renewal of a health plan happen?
HealthCare.gov and the state-run exchanges will process auto-renewals on December 16, after open enrollment ends in most states. So in most of the country, you won’t be able to make a different plan selection after your existing coverage is auto-renewed, unless you have a qualifying event that triggers a special enrollment period. If you don’t actively pick your own plan during open enrollment, you’ll be stuck with your plan for 2021, regardless of how the premium and/or benefits change. So pay attention to the information that the exchange and your insurer send you in the fall, and make whatever changes you want to make by December 15.
Pennsylvania and New Jersey have transitioned away from HealthCare.gov and are using their own new enrollment platforms instead. Residents in those states need to pay close attention to notifications they receive from the marketplace with instructions on how to renew coverage or select a new plan for 2021.
In early 2019, HHS had considered making changes to the auto-renewal process but ultimately decided to keep the auto-renewal process unchanged at least for 2020. The agency again considered making changes to the auto-renewal process for 2021, but abandoned that idea amid overwhelmingly negative public comments. (The proposal had been to auto-renew policies without any premium subsidies if the premium subsidies would otherwise have covered the entire cost of the enrollee’s plan; HHS decided against implementing this proposal, so the auto-renewal process is unchanged for 2021).
If I expect my subsidy to change, should I auto-renew my plan?
Your subsidy amount can change; if it decreases, auto-renewal could result in higher premiums. In 2017 and 2018, benchmark premiums rose considerably, which meant that premium subsidies got much larger. But for 2019, 2020, and 2021, average benchmark premiums have been declining each year, leading to reductions in subsidy amounts. For 2021, across the 36 states that still use HealthCare.gov, average benchmark premiums are declining by 2 percent. But when we look at overall premiums for the whole country, across plans at all metal levels, the median rate change is a 1.1 percent increase. And even if we only consider benchmark premiums, there’s considerable variation from one state to another: Average benchmark premiums in Iowa are decreasing by 29 percent (so subsidies will be quite a bit smaller in 2021), whereas average benchmark premiums in North Dakota are increasing by 29 percent (so subsidies will be quite a bit larger in 2021).
[For perspective, the average benchmark premium in the 39 states that used HealthCare.gov declined slightly in 2019, and premium subsidy amounts ended up essentially unchanged from 2018 to 2019 (they averaged $468/month in 2018, and $469/month in 2019). And for 2020, benchmark premiums dropped by about 4 percent in states that use HealthCare.gov. But nationwide, overall average premiums were essentially flat.]
If the amount of your subsidy is dropping and your own plan’s premium is either increasing or dropping by a smaller amount that the reduction in the benchmark premium, your after-subsidy premium could increase. This can be especially true in areas where there are large reductions in average rates (here’s an example of how this worked in Colorado in 2020).
For 2021, there are also insurers joining the exchange markets in many areas of the country, and that can sometimes lead to a reduction in premium subsidies, if the new insurer undercuts the premiums of the existing insurers. The introduction of new insurers into your market is also a perfect opportunity to see if any of the new insurer’s plans might be a better fit for you than the plan you currently have – but you won’t know unless you actively compare the available options during open enrollment.
There can be significant changes in the benchmark premiums in a given area, even if the overall rate changes in the area are modest. And sometimes the benchmark premium decreases despite the fact that overall average rates increase. If that happens, premium subsidies decrease – since they’re based on the cost of the benchmark plan – and after-subsidy premiums increase. So even if your plan’s rates don’t end up increasing significantly, your after-subsidy premium could still increase significantly if the premium subsidy in your area goes down.
It’s also important to note that if your plan is being discontinued and you don’t select your own plan during open enrollment, auto-renewal will involve the exchange or your insurer enrolling you in the plan that’s most similar to the plan you already had. In some cases, this may be the plan you would have picked anyway, but actively selecting your own plan during open enrollment means that you get to choose your plan, rather than letting your insurer choose it for you.
Auto-renewal might result in a loss of your premium subsidy
Although auto-renewal is available to nearly all exchange enrollees, there are some caveats that are particularly important for people with premium subsidies. (Details were clarified in April 2015 with CMS guidance on re-enrollments, along with a re-enrollment notice published in August 2015, and the 2017 Benefit and Payment Parameters published in early 2016, all of which continues to apply):
- Enrollees who got a premium subsidy in 2019 and failed to file a 2019 tax return or reconcile their tax credit with the IRS will be eligible for auto-renewal of their policy into 2021, but without any subsidies. (In July 2015, the IRS noted that nearly 1.5 million taxpayers who received subsidies in 2014 had not filed a return and/or Form 8962 to reconcile the subsidy. The IRS continued to reach out to those individuals, and ultimately opted to continue 2016 subsidies for people who didn’t file Form 8962 for 2014, but about 57,000 people who simply didn’t file 2014 tax returns at all did end up losing their subsidies in 2015. The leniency that was granted to people who didn’t file Form 8962 for 2014 was a one-time free pass: going forward, subsidy recipients must always file a tax return and Form 8962 in order to reconcile their subsidies for the year that just ended. Failure to do so will result in a loss of subsidies for the coming year.)
- HealthCare.gov enrollees who are receiving a subsidy but whose 2019 tax return indicated an income at or above 500 percent of the federal poverty level (the cut-off for subsidy eligibility is 400 percent) will be eligible for auto-renewal but without any subsidies for 2021. Enrollees can still receive premium subsidies if they manually renew their coverage, including going through the real-time financial eligibility determination again and showing proof that their income has subsequently declined to no more than 400 percent of the poverty level. State-run exchanges are allowed to set their own rules on this, and it varies from state to state. But the subsidies still have to be reconciled on tax returns; if an insured receives subsidies and then ends up with an income above 400 percent of the poverty level, the full amount of the subsidy would have to be returned to the IRS.
- On the other end of the spectrum, if the records the government has on file indicate that your income is too low to qualify for a subsidy, your subsidy can be eliminated unless you actively provide the exchange with proof of the subsidy-eligible income that you’re projecting for the coming year.
- HealthCare.gov enrollees who didn’t provide the exchange permission to obtain updated tax return data for use in the annual subsidy eligibility determination process will be eligible for auto-renewal of coverage but without subsidies. (A subsidy can still be obtained if you return to the marketplace and verify your updated financial information). State-run exchanges can set their own rules regarding enrollees in this situation.
If you’re in any of the situations described above, you’ll receive a notice from the exchange regarding your renewal. If that happens, it’s vitally important that you communicate with the exchange to make sure that your information is updated and accurate.
If I have an off-exchange plan or pre-ACA plan, should I let it auto-renew?
If you have an ACA-compliant plan that you purchased outside the exchange, it’s worth checking again during open enrollment to see whether you’d be better off with a plan through the exchange for 2021, or with a different off-exchange plan. Some off-exchange plans’ premiums include the added cost to cover cost-sharing reductions (if they’re also sold on the exchange, and this mostly applies to silver plans), so even if you get your plan outside the exchange, pay close attention to make sure you select the plan that represents the best value for 2021. In some cases, you might find that bronze or gold plans provide a better value, if you’re in a state where the cost of CSR is added to silver plan rates both on- and off-exchange.
Premium subsidies (premium tax credits) are crucial for keeping coverage affordable for millions of people, but they’re only available if you buy your coverage in the exchange. You can have the tax credit applied to your premium to reduce the amount you pay each month, or you can pay full price and claim the whole tax credit on your tax return. But either way, you can only get the tax credit if you have on-exchange coverage. So for people with off-exchange coverage, open enrollment is a great time to reconsider whether you’d be better off with a plan through the exchange.
It’s also worth noting that because of increases in the poverty level over time, a family of four can qualify for premium subsidies in the rest of the continental United States with an ACA-specific modified adjusted gross income as high as $104,800 in 2021. In 2014, subsidy eligibility for a family of four stopped at just over $94,000. So even if you settled on an off-exchange plan in the past because your income was too high for a subsidy, it’s worth your while to recheck your subsidy eligibility in the exchange each year.
If your plan is grandmothered (purchased after the ACA was signed into law but before the bulk of the ACA’s provisions took effect in January 2014), it may be eligible for auto-renewal or it may not, depending on where you live and what health insurance carrier you have. The same is true of grandfathered plans, which can continue to renew indefinitely, but with renewal at the discretion of the insurer.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.