find a plan

What happens if I don’t make my premium payment by the end of the grace period?

Image: DC Studio / stock.adobe.com

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. 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 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. But 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.

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.

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.

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.

Find affordable health plans.

Helping millions of Americans since 1994.

(Step 1 of 2)

Related articles

0 0 votes
Article Rating
Subscribe
Notify of
guest
24 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
John P Moss
John P Moss
1 year ago

I was automatically re-enrolled in my Cigna plan this January 2020. I never paid my premiums and, as far as they were concerned, I still qualified for a healthcare subsidy. In the meantime, I purchased a regular policy from an insurance agent without a subsidy. I assumed that the plan would terminate itself with no penalty. Now it is May 11th and my Cigna plan just terminated from lack of payment on April 29th (when an extended grace period ended). Cigna says we owe them $3800 for Jan thru Apr premiums and those premiums received a healthcare subsidy of $754. According to this article, they should have at most retroactively terminated the policy back to January or maybe February. But I am most worried about the tax subsidy that I may owe, even though I never used the insurance. I have been back and forth between Cigna and the Marketplace.gov and they keep shutting me down, saying they can;t do anything and we owe from January through the end of April. What are my options now?
John in Missouri

Louise Norris
Louise Norris
1 year ago
Reply to  John P Moss

John, I would recommend that you reach out to the Missouri Department of Insurance to see if they have any advice or guidance for you. In this situation, there should not have been a 90-day grace period, because you didn’t pay any premiums during the plan year, which began in January. The 90-day grace period for people with premium subsidies only applies if you’ve already paid at least one premium during the year, to effectuate your coverage. If no premium is paid even for the first month, the coverage should not have been effectuated, which means it was never in force. See more info on that here: https://www.healthcare.gov/apply-and-enroll/health-insurance-grace-period/
Cigna’s records should show that your plan was never effectuated, which would mean no premium subsidies should have been paid on your behalf. But if they did effectuate your plan for 2020, it should have retroactively terminated to the end of the month after you last paid a premium, which would mean the end of January. People in this scenario do have to pay back that month’s premium subsidy, but again, I don’t think that should be the case for you, since you never paid any premiums for 2020.

Kit
Kit
11 months ago

So here’s my situation. I had a subsidy from January to March. However in March I got notice from the Market Place that they had not received mg income info?? I didn’t argue and just sent it again. Then they come back and say not received in time! So I lose my subsidy. BCBS now charging me a $3K premium!! I appealed to the market place exchange and still waiting to hear back. However now I find my bcbs Insurance plan terminated! I need my insurance as my wife has an upcoming surgery. What can I do?

Louise Norris
Louise Norris
11 months ago
Reply to  Kit

Kit,
I’m sorry you’re in this situation. Did you use a broker to help with the enrollment process? If so, I would recommend contacting the broker asap, as they’ll be able to help you address this situation. If not, you’re going to need to work with both the marketplace and BCBS to get this sorted out. If you didn’t request an expedited appeal, you’ll want to do so, given the upcoming surgery: https://www.healthcare.gov/marketplace-appeals/expedited-appeal/ (if you’re in a state that runs its own exchange, the appeals process is different, but you should still be able to request an expedited process).
The problem here started with the marketplace, and they’re ultimately the ones who will need to reinstate your subsidy and alert BCBS to the situation. But since BCBS terminated your plan (presumably for non-payment of premiums?), you’re also going to need to contact them. From our experience, they each might try to pass the buck to the other entity, so it’s important that you document everything, including the name of the people you speak with and the incident/ticket numbers for your calls. You might even be able to get a representative from the marketplace and BCBS on a three-way phone call, which could help to sort it out.
Best of luck!

zoe
zoe
10 months ago

I am coming up on Medicare August 1. I have a very expensive plan from Kaiser right now (through Covered CA but they don’t pay anything) and it has a $6500 deductible. I haven’t paid June yet ($850) and I don’t want to pay July but…I don’t want to be completely without. What I’m hoping is I can squeak by in the grace period and if something happens I’ll pay and if I can make it to August without just get straight on Medicare. Do you think that is possible. (I feel dishonest but the payments have been killing me.)

Josh Schultz
Josh Schultz
10 months ago
Reply to  zoe

It’s never recommended to go without health coverage — but your concerns about premium costs are understandable. Medicare will be far more affordable once you get there. This article should answer your questions — although it seems like the answer may depend on whether you receive advance premium tax credits (APTC), which would extend your grace period from 30 to 90 days. If this is the case and you choose to drop your coverage as you mention here, remember that you’ll have to repay the IRS for APTC used in the first month of the grace period — meaning you’d only save a little more than one month worth of premiums.

Josh Schultz
Josh Schultz
10 months ago
Reply to  zoe

Your grace period is only 30 days if you’re not receiving subsidies — which means you probably wouldn’t be able to do this. However, if you’re receiving advance premium tax credits (APTC), your grace period is 90 days, and you would be able to delay your premium payment in the way you describe. Your coverage would continue through the end of the first month of the grace period if you receive APTC, which means you would have to repay APTC for that month — and probably wouldn’t save that much money.

Karin
Karin
8 months ago

I have until August 30 to elect Cobra and then have a 45-day grace period to pay. If I elect Cobra on August 30 and then become employed and receive health coverage before Oct 15 and have NOT paid Cobra, will that affect my credit rating or my ability to qualify for coverage with the same carrier?

Jeff
Jeff
7 months ago
Reply to  Karin

I’m wondering the exact same thing. Did you gen an answer? After being laid off I signed up for COBRA coverage for the month of October. I have not paid my premium (yet) and my coverage through my new employer starts the last week in October. Since we didn’t use our COBRA insurance for any services during the month, I’m wondering how not paying the COBRA premium will affect me (my new insurance is with a different provider).

Louise Norris
Louise Norris
6 months ago
Reply to  Jeff

Jeff, please see the response above. If you don’t make the payment to effectuate your COBRA coverage, your coverage will be terminated back to the date that your group coverage would otherwise have terminated without COBRA. So you’ll have a gap in coverage for most of October, but no past-due premiums that need to be paid, since the plan would not have been providing you with coverage during October.

Louise Norris
Louise Norris
6 months ago
Reply to  Karin

We would advise you to reach out to your state’s insurance department to make sure you understand any specific rules that your state may have. But in general, if you never effectuate your COBRA coverage (ie, you don’t make your premium payment), there’s no debt owed to the insurer because they never actually provided any coverage. Your coverage would simply terminate back to the date that your group plan was in force with premiums paid-up.
The scenario described in this article (in which a person could have a past-due premium that needs to be paid before a new plan could be effectuated) happens when an individual market plan is terminated due to non-payment of premiums, but the grace period results in the policy being terminated a month AFTER the premium was last paid-up, or when the grace period is ongoing during the time the person is trying to re-enroll and their coverage has not yet been terminated, meaning that they could owe up to three months of premiums. In those scenarios, the person has a debt due to the insurer. But if the coverage is never effectuated, there’s no debt due because no coverage was ever provided.

Cheri
3 months ago

I paid for Cobra through 12/31/20. I had a doctor’s appt on 12/28/20 which was not billed until 2021. Who is responsible to pay the bill?  

Louise Norris
Editor
3 months ago
Reply to  Cheri

Your COBRA plan should cover the bill (assuming you’ve met your cost-sharing obligations), since you were covered under that plan at the time the service was received.

Kathleen
Kathleen
2 months ago

Hi, I thought I was set up for automatic payment on my insurance premiums (NY state market place policy – United Healthcare). Today when I checked, I realized that I did not set it up correctly and I was two days after the grace period. I paid my full bill today (3/2) and the grace period ended on 2/28. The payment shows as submitted but is still processing. Is there anything I can do to help my case so that my insurance is not terminated? Thank you

Louise Norris
Editor
2 months ago
Reply to  Kathleen

We advise that you reach out to both NY State of Health and UnitedHealthcare as soon as possible to check on this. Since the grace period ended on a weekend, it’s possible they’ll be flexible with you on this.

Stacey Ann
Stacey Ann
2 months ago

I enrolled in Molina for 2020, my premium with my tax credit was $25. My last payment was in July 2020 and I haven’t made a payment since. I received a letter now 03/08/2021 saying I owe over $1.4k. I called marketplace and cancelled the plan, I was unaware they were still charging me month to month and took away the tax credit making my premium $300 and auto-renewed it. I’ve had insurance with my job since September 2020. What can I do?

Louise Norris
Editor
2 months ago
Reply to  Stacey Ann

You’re probably in luck in terms of the tax credit, as the American Rescue Plan (expected to be signed into law this week) includes a provision to eliminate excess premium subsidy repayments for the 2020 tax year (in other words, the IRS won’t make you pay back the tax credit). See Section 9662: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#toc-H43439D12D8DE48B4A7B8D83031FDFC2E
Molina should have canceled your plan three months after your last payment, with the termination date effective one month after your last payment. That would have meant that you owed at most one month’s premium to Molina. You can reach out to them and ask them why they didn’t do that, as that’s the standard process when a subsidized marketplace enrollee gets behind on premiums.

Alyssa Byars
Alyssa Byars
1 month ago

I accidentally enrolled in coverage for my husband and I through the marketplace for Molina healthcare. The payment for this coverage being $300 a month each. For some reason when I enrolled they set my coverage back to January 8th. I applied only a week or so ago so mid march. So, they are saying I owe these payments for January-March. I would not have even qualified for insurance as I was enrolled in Medicaid for the month of January until the day I applied. I tried to cancel because my Medicaid was reinstated due to the pandemic until further notice. Is there anything I can do? Will I actually have to pay back for each of these months. I don’t have the money to make $600 a month insurance payments.

Louise Norris
Editor
1 month ago
Reply to  Alyssa Byars

If you don’t make any payments at all, your coverage will simply not take effect, which means you won’t owe anything. But you should keep contacting the marketplace and Molina to get this resolved and ensure that no premium tax credits are being mistakenly paid on your behalf.

Erick Cruz
Erick Cruz
1 month ago

in am elegible for tax credit, however since i am enrolling during a special enrollement period they are telling me that i have to pay for the first month full premium ($900. 00 withouth applying subsidy). Do i get a refund for this first month at any point? Or doni lose this money even if i am approved for tax credit?

Louise Norris
Editor
1 month ago
Reply to  Erick Cruz

It’s possible you’re enrolling before the new subsidy amounts are available in your state’s marketplace, as these are being rolled out over the next few weeks (they debuted on HealthCare.gov as of April 1). If so, yes, you’ll be able to claim the additional premium subsidy when you file your 2021 tax return.
When you reconcile your premium tax credit on your tax return, the IRS will send you any additional amount that you’re owed above and beyond the amounts that were sent to your insurer during the year. The additional premium tax credits for 2021 are retroactive to the start of the year or the start of a person’s marketplace coverage if they enrolled after the start of the year (the usual caveats apply: You’re not eligible for a subsidy for any month that you were eligible for Medicaid or a comprehensive employer-sponsored plan that’s considered affordable)

JOSEPH HESSLING
JOSEPH HESSLING
16 days ago

Even though I terminated my payments, the insurance (CareSource) continues to bill the monthly premiums. Healthcare.gov says I owe the payments because I did not notify them to cancel the policy. My last payment was for 10/31/2020, and just received a bill in 04/2021 for the month of November. No claims were made.

Louise Norris
Editor
16 days ago

As you’ve probably discovered from this, simply ceasing to pay premiums is not an ideal way to go about cancelling your health coverage. You do need to contact the exchange/marketplace in order to officially terminate your coverage. By now, your policy should have terminated due to lack of payment, but it sounds like they’re still seeking payment for November, as your coverage didn’t officially terminate until one month into your grace period (I’m assuming you were receiving a premium subsidy in 2020, and thus had a three-month grace period with coverage terminated back to the end of the first month?)
The good news is that if a premium subsidy was being paid on your behalf in 2020, you do not have to repay the excess subsidy to the IRS: https://www.healthinsurance.org/blog/how-the-covid-relief-law-will-rescue-marketplace-plan-buyers/ Normally, you would have had to repay the IRS for the subsidy that was paid on your behalf for the first month of your grace period, as described in the article above.

JOSEPH HESSLING
JOSEPH HESSLING
15 days ago
Reply to  Louise Norris

Thank you for the response. That was what made it hard to understand. There was no subsidy involved. It needed to cover a two month waiting period before the insurance kicked in for my new job on 11/01. I was told (incorrectly) to just stop making payments to CareSource. When I received a bill for November, I called CareSource, and they told me to call the MarketPlace. I called them, and they said I could not do a retroactive cancellation unless it met one of three criteria (all things like a natural disaster that prevented me from calling). So they cancelled as of 11/17. I filed an appeal with CareSource, and it was turned down, and I was told I owed until 11/17 – a partial payment. It is now going to collection. In the meantime, I spoke to several agents who have stated not paying premium should have cancelled the plan.

24
0
Would love your thoughts, please comment.x
()
x