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 health insurance 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 (as described below, there’s an exception to this rule when coverage is auto-renewed for the new year; the grace period can carry over from the end of one year into the next year, even if premiums have not yet been paid for the new year).
For those without a subsidy, the grace period is generally one month, although this can vary from one state to another, since it’s regulated at the state rather than the federal level. This applies to plans purchased on-exchange without a subsidy, as well as 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 grace period (typically one month), coverage will be retroactively terminated to the end of the month for which a premium was last paid.
For enrollees who are receiving subsidies (and who have effectuated their coverage by paying 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 advisor.
Individuals who lose coverage in the marketplace due to non-payment of premiums will not be able to rejoin a marketplace health plan until there is a new open enrollment period, unless they experience a qualifying event (and most qualifying events have a prior coverage requirement; most are designed to allow a person to change coverage, rather than go from being uninsured to insured). During the time that you’re uninsured, you’ll be responsible for paying any medical bills that you incur.
Can I enroll again during open enrollment if my old plan terminated for non-payment of premiums?
Open enrollment has generally allowed 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. The market stabilization rules that were finalized by HHS in 2017 made some changes that allow insurers to recoup past-due premiums when people try to re-enroll during open enrollment. But HHS has proposed a reversal of those rules as of 2023.
The new rules are described in more detail here, but essentially, if your coverage is terminated for non-payment of premium and you then enroll in a plan offered by that same insurer within 12 months of your prior plan being terminated, the insurer can require you to pay your past-due premium before effectuating your new policy (but again, HHS has proposed a rule change that would prevent this as of 2023).
If your coverage was already terminated for non-payment of premiums, the most you would owe in past-due premiums is one month of premiums, as your plan termination date would have been the end of the first month of the grace period. If you weren’t getting a premium subsidy, you wouldn’t have any past-due premiums, because your plan would have been terminated to the last date that you had paid for the coverage (insurers cannot assess past-due premiums for months after the coverage termination date).
But if you’re still in the grace period when you’re re-enrolling (ie, your coverage hasn’t yet been terminated), you could owe up to three months of past-due premiums if you’re re-enrolling with the same insurer.
You can enroll in a plan with a different insurer without having to pay up your past-due premium from the prior year, although another insurer owned by the same parent company that owned your previous insurer would be able to require you to pay the past-due amount. And in some areas of the country (particularly rural areas) there is just one insurer offering plans. This makes it impossible to avoid the past-due premiums rule if the insurer chooses to implement it.
In June 2021, HHS noted that they were reconsidering this rule to determine “whether it may present unnecessary barriers to accessing health coverage.” And the proposed Notice of Benefit and Payment Parameters for 2023, issued in early 2022, calls for the rules to return to the way they were prior to the Market Stabilization Rule (in other words, insurers would no longer be allowed to apply premium payments to past-due premiums if a person enrolls in the same plan, or another plan issued by that insurer, during open enrollment).
What if I’m in the grace period during open enrollment?
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.
Although a person generally has to have made at least one premium payment during the current benefit year in order to be eligible for a grace period, that is not the case if they’re in a plan that has been auto-renewed. CMS has clarified (here and here) that if a person’s plan is auto-renewed (either the same plan, or a crosswalked plan), that’s considered the same plan they already had, meaning that it has already been effectuated and the same grace period is available as would be available at any other time of the year.
So for example, consider a person who is receiving a premium tax credit, has paid for their coverage through December, and is auto-renewed for the coming year, but then fails to make their January premium payment. Although they haven’t made a payment in the current benefit year, they are still eligible for the same three-month grace period that they would have been eligible for if their premium lapse had happened a few months earlier.
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.