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Benefit Revolution: New ObamaCare Loophole: Enrollees in Exchanges Only Need to Pay 11 of 12 Months, Healthy People Can Wait and Only Pay 9 of 12 Months
A loophole in Obamacare regulations has health plans worried that people who bought coverage on the federal marketplace could skip their December payment and insurers would have few tools available to recoup that missed premium.
"People can get a free month of health care," says one insurance industry official, who flagged the issue and requested anonymity to speak openly about the problematic guidance. "If they knew about the rule, they functionally wouldn't have to pay for their last month of coverage."
The loophole stems from federal guidance published July 16. The underlying regulations are meant to protect consumers' rights as health insurance shoppers — but which could have the unintended consequence of making it easier for subscribers to skip out on a payment.
Obamacare guarantees enrollees a three-month grace period if they fall behind on their premiums. Someone who stops paying in March, for example, has through May to make good. So if they don't pay up in March but have a medical bill in May, they can get that bill covered by paying their back premiums. It's only after May that they're really uninsured.
And if someone misses their grace period entirely — doesn't pay in March, or April or May — federal guidance published July 16 specifies that their coverage runs out on the "last day of the first month of the grace period." In this hypothetical example, the person who never paid for March, April and May would still get coverage through March 31.
That same federal guidance has other important instructions for how to handle subscribers' payments for 2015. It says that if an Obamacare shopper goes online and re-enrolls in a new insurance plan, any payments towards that new, 2015 plan cannot be applied to outstanding debt on the old, 2014 plan.
This, insurers worry, is what could make December a bit of a no-man's land for insurers looking to get paid. Somebody could theoretically refuse to pay up in December 2014 and then rejoin their plan — or buy a new one — in January or February of 2015. The health plan they had in December can't terminate their coverage or use their new premiums to to cover the outstanding debt.
"What happens is you have all of December and January and February to pay that December 2014 premium," says the insurance source, describing the situation. "If you still haven't paid by February, what we would typically do is terminate your policy. But we can't do anything if you have a new, 2015 policy."...
Note, however, that Sarah's piece only covers the case where someone truly needs coverage for all 12 months in a year. Even more troubling is what is not reported. An enrollee who is healthy can plan all of their care during the first nine months of the year and stop paying for October, November and December. If the person has an emergency care situation, they have until the end of December to pay for the needed October-December coverage. And as Pat Paule and Henry Stern at InsureBlog pointed out to me in a private email, if the claim a person faces is relatively minor (like less than three months of premium) during the October to December timeframe, the individual can simply pay cash for the claim and move on without having to pay the full three months of premium.
Hence, without a correction to these regulations, no healthy person ever needs to pay for the last three months of his or her plan-year coverage. But carriers needn't worry too much about this shortcoming because taxpayers will help them shoulder the burden in their shortfalls during, at least, the first three years of PPACA under the Three R's "Bailout" program. More on that here, here and here.
Also note that this new fantasy land of 90-day grace periods only applies to plans actually purchased on PPACA Exchanges with a subsidy. Those who still pay their own premiums aren't given the same safety net, hammock. Thanks to InsureBlog again for that clarification.
A loophole in Obamacare regulations has health plans worried that people who bought coverage on the federal marketplace could skip their December payment and insurers would have few tools available to recoup that missed premium.
"People can get a free month of health care," says one insurance industry official, who flagged the issue and requested anonymity to speak openly about the problematic guidance. "If they knew about the rule, they functionally wouldn't have to pay for their last month of coverage."
The loophole stems from federal guidance published July 16. The underlying regulations are meant to protect consumers' rights as health insurance shoppers — but which could have the unintended consequence of making it easier for subscribers to skip out on a payment.
Obamacare guarantees enrollees a three-month grace period if they fall behind on their premiums. Someone who stops paying in March, for example, has through May to make good. So if they don't pay up in March but have a medical bill in May, they can get that bill covered by paying their back premiums. It's only after May that they're really uninsured.
And if someone misses their grace period entirely — doesn't pay in March, or April or May — federal guidance published July 16 specifies that their coverage runs out on the "last day of the first month of the grace period." In this hypothetical example, the person who never paid for March, April and May would still get coverage through March 31.
That same federal guidance has other important instructions for how to handle subscribers' payments for 2015. It says that if an Obamacare shopper goes online and re-enrolls in a new insurance plan, any payments towards that new, 2015 plan cannot be applied to outstanding debt on the old, 2014 plan.
This, insurers worry, is what could make December a bit of a no-man's land for insurers looking to get paid. Somebody could theoretically refuse to pay up in December 2014 and then rejoin their plan — or buy a new one — in January or February of 2015. The health plan they had in December can't terminate their coverage or use their new premiums to to cover the outstanding debt.
"What happens is you have all of December and January and February to pay that December 2014 premium," says the insurance source, describing the situation. "If you still haven't paid by February, what we would typically do is terminate your policy. But we can't do anything if you have a new, 2015 policy."...
Note, however, that Sarah's piece only covers the case where someone truly needs coverage for all 12 months in a year. Even more troubling is what is not reported. An enrollee who is healthy can plan all of their care during the first nine months of the year and stop paying for October, November and December. If the person has an emergency care situation, they have until the end of December to pay for the needed October-December coverage. And as Pat Paule and Henry Stern at InsureBlog pointed out to me in a private email, if the claim a person faces is relatively minor (like less than three months of premium) during the October to December timeframe, the individual can simply pay cash for the claim and move on without having to pay the full three months of premium.
Hence, without a correction to these regulations, no healthy person ever needs to pay for the last three months of his or her plan-year coverage. But carriers needn't worry too much about this shortcoming because taxpayers will help them shoulder the burden in their shortfalls during, at least, the first three years of PPACA under the Three R's "Bailout" program. More on that here, here and here.
Also note that this new fantasy land of 90-day grace periods only applies to plans actually purchased on PPACA Exchanges with a subsidy. Those who still pay their own premiums aren't given the same safety net, hammock. Thanks to InsureBlog again for that clarification.
