What to do when your health insurance is cancelled.

Wednesday, April 12, 2017 @ 06:04 AM
Author: Peter Young

A client called me to say his family’s health insurance had been cancelled.  Through an oversight he missed a premium payment and once the 30 day grace period expired the insurance company terminated his coverage. What options does he have?

Under the present rules – still in effect – he can only buy health insurance as an individual or as a family during open enrollment which doesn’t start until November, unless he falls into a number of special circumstances, (e.g. his COBRA expired, his insurance company went out of business or he got married) none of which applied to him.

His options are few:

He can buy a hospital indemnity policy.  These have become more popular of late because they are inexpensive – $630/month for a 55 year old with a wife and two kids – and they don’t have super high deductibles, so they appeal to those who want “get something out of their insurance.”  They pay a fixed amount for an office visit or a day in the hospital.  If the bill is more the patient is responsible for the balance.  Generally there is no requirement to go to an in network doctor – the insurance company pays cash, although doctors and hospitals may ask you to assign any insurance payment over to them.  The big problem with these plans is that the fixed payments are often insufficient.

He can also become a member of a healthshare ministry.  These have become popular of late because they are cheaper than buying insurance and members are exempt from Obamacare.  There are however several problems.  Firstly they won’t take someone with pre-existing conditions.  Secondly they don’t provide the same degree of coverage as Qualified Health Plan.  Thirdly – and perhaps most importantly for the longer term – they don’t hold any reserves, i.e. no money is set aside to pay future claims.  If members’ shares (contributions) don’t cover the needs (claims) bills will not get paid.  The ministries have had a good payment record to date but as the ads always say: “past performance is no guarantee of future results.”

Finally, short term medical plans used to be an option for people suddenly without health insurance, but changes in regulations have severely limited that alternative.  Short term policies issued after March 31st 2017 ate limited to a max of three months’ coverage.  Not much help when open enrollment is six months away!

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