This week has been another reminder of how important it is to set up automatic payments for health insurance premiums—and, just as importantly, make sure there’s enough money in the account to cover them.
Three of my clients are dealing with issues this week because their payments didn’t reach the insurance carrier by the deadline. It’s a simple thing that can easily slip through the cracks, but it can create a much bigger headache than it’s worth.
3 Stories Highlighting Why This Matters
Story 1
One couple I work with is on a guaranteed-issue plan that became their only viable option after their COBRA coverage ended. The husband has health issues that would make it difficult for him to qualify for traditional individual health insurance.
Because they transitioned through COBRA, they were able to enroll in a guaranteed-issue plan, meaning the insurance carrier was required to offer them coverage regardless of his health history. They had paid their premiums faithfully for years, but last month, their payment didn’t reach the carrier by the end-of-month deadline. As a result, their coverage was terminated.
Now what? There wasn’t another comparable plan available to them on the individual market. Fortunately, they were able to contact the insurance carrier and have their coverage reinstated this time. But the carrier was not obligated to reinstate the policy.
If they hadn’t made an exception, this couple could have found themselves without meaningful health insurance and with very few options. It was a close call—and a good reminder that something as simple as making sure your premium payment arrives on time can have serious consequences. With automatic payment, it’ll always arrive on time.
Story 2
Another family I work with, who doesn’t have the same health concerns as the previous couple, called me today with a similar problem. They had their insurance set up on auto-pay, but when the carrier withdrew last month’s premium, there wasn’t enough money in the account. The policy lapsed.
Fortunately, they were also able to contact the insurance carrier and have their coverage reinstated this time. If they hadn’t been able to do that, the consequences wouldn’t have been as serious as they could have been for the first couple. However, they would have faced higher premiums because rates have increased since they originally enrolled, along with a new 12-month pre-existing condition exclusion.
In other words, a simple oversight could have meant paying more for less coverage.
Story 3
The third situation involves a five-person group that fell a little behind on its health insurance payments and was ultimately canceled. During that time, two employees left the company.
To reinstate the coverage, the insurance carrier is requiring ABC Company to pay the equivalent of two months of premiums for all five employees, including the two who are no longer with the company. Any resulting overpayment will be credited back to ABC Company later.
The company is also required to enroll in automatic payments going forward.
While the coverage can be reinstated, the situation has created an unexpected cash-flow problem that could put additional financial pressure on the company over the next few months.
So, besides being a huge hassle, what’s the big deal?
Insurance companies are not required to reinstate customers who lapse. Sometimes, insurance carriers will only do it once and may charge a service fee to reinstate. What if these people had a major health event during the lapse? It could mean bankruptcy. They also could be in a position where they have become no longer insurable.
My suggestion is to always set up an auto-pay agreement for your health insurance from an account that will always have enough funds to cover the payment. Another suggestion is to open all mail from your insurance carrier. This is too important to fool around with.
If you need the forms to set up auto-pay (whether you are my client or not), let me know. I will do my best to get you what you need.
As always, you can grab a spot on my calendar too!
