The Department of Health and Human Services (HHS) under Tom Price slipped through a rule change to Obamacare. It is a rule pushed by insurance companies. Insurers wanted the right to collect past-due premiums before allowing someone to enroll in a new plan with the same carrier. The key is same or related insurer.
Past-due premiums may be collected
Insurance companies have found it difficult to collect past due premiums. Many accept what premium tax credits they received and write-off the lost month’s premium. A few companies aggressively pursue collection even of a few hundred dollars.
The rule is intended to make it easier to collect past-due premiums and to give companies the means to refuse to provide more coverage to individuals that have outstanding balances.
What is a past-due premium ?
A past-due premium is an unpaid premium for health insurance, usually billed every month. The ruling relates to coverage obtained through the marketplace or exchanges.
If a person misses a payment the insurer is responsible for providing a grace period so that coverage is not immediately cut off. Plans purchased through the marketplace have a three-month grace period. Plans purchased outside the marketplace are governed by state laws. Most permit plans to be terminated at the end of the month for which payment was not received.
The new rule deals with plans purchase through the marketplace. If the premium is not paid by the end of the grace period the coverage can be cut off retroactively to the last day of the first month of the grace period.
♦ If a person failed to pay May’s premium he or she has until the end of July to pay. At the end of July the insurer can terminate coverage effect the end of May. The person would still have had coverage in May even though the premium was not paid. The May premium would be past-due.
Important — If the insurer paid out claims during June and July, they will try to recover that money.
Some people could work the system
Possibility 1 -Say a person stopped paying premiums in October and did not make a payment for the rest of the year. That would be November and December. During open enrollment, he or she chooses a plan with the same insurer.
The bill for January’s new plan will come sometime in December. It is due by January 10th. On the bill will be a notice of past-due premiums for October, November and December. November and December still appear because when the bill is generated in December the grace period is still in effect.
If payment is made in December the payment will be applied to the past-due months. If the person waits and does not pay until after December 31st the grace period would be finished and the coverage would be terminated back to October 31st. This would leave one month past-due premium instead of three months.
The insurer would need to send a new bill in January stating they need payment for January and past-due premium for October.
Possibility 2 - Change the insurance company. The rule applies to when people try to enroll in plans by the same or related insurance company. The new insurance company is concerned about collecting money owed to them.
Who might be charged ?
The rule became effective June 19, 2017. An individual or employer who tries to enroll in a marketplace plan with the same insurer (or a related insurer) after missing a premium payment within the last 12 months may be responsible for paying the past-due premium before the new enrollment will become effective.
A small catch, the insurer must have a stated policy requiring payment of past-due premiums. This may be found in the insurer’s enrollment documents. Most insurance companies hurried to send out notices right after June 19th to indicate they have adopted this policy. If you did not receive something in the mail, that does not get you off the hook. They can also send these notices electronically.
Insurers’ ability to charge past-due premiums may be affected by state laws. State laws have the ability to limit this ruling. Your insurance commissioner’s office will be able to clarify how your state will handle this. It is expected most red states will go along without question and most blue states will try to soften the effect.
Insurance companies can try to collect past-due premiums from the person that was obligated to pay the premium. The person that created the application and received premium tax credits. They cannot try to collect from other family members.
Insurance companies can NOT try to collect any past-due premiums that occurred prior to the rule being adopted, June 19, 2017.
Insurance companies still must obey state laws.
How does this affect plans bought off-exchange ?
The rule covers plans purchased using premium tax credits. Those can only be used when purchasing insurance from one of the exchanges.
State laws govern how an insurance company can treat past-due premiums for plans bought off-exchange. State laws vary as to how much grace period is required before a policy can be terminated. State laws also control whether the policy can be terminated retroactively.
Terminating a plan retroactively can be a very big issue if the plan has paid out a lot of money to healthcare providers.