Q. What happens if I don’t make my premium payment by the end of the grace period??
A: If you fail to pay your premiums and exhaust the grace period for plans offered in a health insurance marketplace, you will lose your insurance coverage. The grace period is either one month or three months long, depending on whether or not you’re receiving subsidies and whether or not you’ve paid at least one premium so far during the year.
The three month grace period applies to those who receive federal subsidy assistance in the form of an advanced premium tax credit and who have paid at least one full month’s premium within the benefit year. For those without a subsidy the grace period is one month (the one-month grace period also applies to plans purchased outside the exchange, since none of those plans qualify for subsidies).
For enrollees who are not receiving subsidies, if payment is not made prior to the end of the one-month grace period, coverage will be retroactively terminated to the end of the month for which premium was last paid.
For enrollees who are receiving subsidies (and who have paid at least one month’s premium), if their premiums go past three months overdue, the coverage will be terminated retroactive to the end of the first month of the grace period. So if a subsidized enrollee pays the January premium but then doesn’t pay February, March or April, the coverage would then be terminated as of the end of February.
In order to keep coverage in place past the end of the grace period, you have to be fully paid-up by the end of the grace period. In other words, the grace period does not allow people to be perpetually three months behind on their premium payments. If you get behind on your premiums (and you’re receiving subsidies), you’d need to fully pay premiums for all three months of the grace period in order to retain your coverage.
If your coverage is terminated back to the end of the first month of the grace period due to non-payment of premiums, it’s important to note that you’re not eligible for a premium tax credit (subsidy) for that first month of the grace period. New York State of Health (the state-run exchange in New York) explains this with an example in question 12 of their FAQs about Form 1095-A. So the premium tax credit that was paid on your behalf for the first month of the grace period will need to be paid back when you file your taxes, even though your coverage didn’t terminate until the end of that first month of the grace period (ie, claims incurred during that month would have been paid by your carrier).
The IRS has also prepared FAQs about Form 1095-A, and notes that it’s common for people to receive an incorrect Form 1095-A if their coverage was canceled retroactively due to non-payment of premiums; in that case, the exchange will issue a corrected Form 1095-A. If in doubt, contact the exchange and/or your tax adviser.
Individuals who lose coverage in the marketplace due to non-payment of premium will not be able to rejoin a marketplace health plan until there is a new open enrollment period, unless they experience a qualifying event such as a marriage or the birth of a child. During the time that you’re uninsured, you’ll be responsible for paying any medical bills that you incur. You may also have to pay a penalty when you file your taxes the following year if you end up going without minimum essential coverage for three or more months during the year.
Open enrollment allows people a chance to start over each year with new coverage, regardless of whether the prior year’s coverage was terminated during the year due to non-payment. But HealthCare.gov enrollees who are in the grace period at the end of the year need to be aware that the grace period does not reset at year-end if the plan is auto-renewed.
So for example, if you didn’t pay November and December premiums, and then your plan is auto-renewed for January, you can’t just pay January’s premium to keep your coverage going for the coming year. You’d have to pay all three months (November, December, and January) by the end of the three-month grace period that began when you missed the November payment. The total amount has to be paid in full by the end of the grace period, or else your coverage will be terminated back to the end of November (this is the same system that would be used regardless of the time of year that the non-payment of premiums occurs).
However, if you enroll in a different plan for the coming year (rather than letting your plan auto-renew), your old plan would terminate back to the end of November, and your new plan would start January 1, as long as you pay January’s premium. And if you lose coverage during the year due to non-payment of premiums, you’re allowed to enroll in that same coverage again during open enrollment, and the carrier can’t require you to pay past-due premiums from the prior year in order to re-enroll.