In comments, PowerMAD asks a good question about the risks of running naked:
What are the consequences (beyond the obvious gambling that nothing’s going to happen) of dropping health insurance for Nov/Dec, with the plan to re-up for January? I’m about to turn 61, unable to get a full-time job that pays anywhere near what I need to get by, so struggling to make it as a freelancer. My health is okay. Husband is about to turn 53, but he’s got some problems – nothing life threatening, but semi-chronic. A major client of mine has dried up w/o warning; I’ve got a couple new ones in the pipeline, but won’t be generating actual income until January.
There are a lot of things to untangle. First, a scenario of significantly variable income is an excellent reason to buy insurance on Exchange. When times are good the advanced premium tax credit might be either very small or nil. However if there is an unexpected income drop, the advanved premium tax credit can be updated for the following month once the new income information is entered.
At the age of the couple, I would be terrified about running naked for two months but when there are no good options, bad options are the only ones to choose from. I am assuming they had coverage since January 1. That means they would have had ten months out of twelve with qualified coverage. The mandate penalty only kicks in if there is a gap of at least three months. The mandate will not apply in this scenario.
Now what are the options that are possible to provide at least the semblence of coverage?
First, I would check out Medicaid eligibility. I don’t think that will be a viable option but it is worth ten minutes.
Secondly, in the ACA, there is a three month grace period for non-payment of premiums after the first premium of the policy period is paid to effectuaatte the policy. It is effectively a floating one way option for people in this situation (it has some policy implications but we’ll ignore those today).
If they do not pay the November premium, the insurer is still on the hook for the first thirty days worth of charges. The insurer can go back for the unpaid premium debt and any cost sharing that would have been incurred from any services. Now let’s assume that the December premium is also not paid. At that point, the providers eat the cost. The insurer now holds two months of premiums and any potential cost sharing as a bad debt that it can collect on. once the insurer gets paid and the account is brought back to current, the providers will get paid. Due to the time of the year, the policy is then terminated on December 31, 2016 and a new policy is needed for January 1, 2017 but in other times of the year, this implicit option can go for three months instead of two months.
The problem then becomes January coverage as a new policy is needed and it does not go into effect until the first premium is paid. I don’t have a good hack or exploit for that. February coverage, given the details is simpler, a policy could be bought in early January and paid for in late January and things go back to the way they were.
Sean
Re-enrollment requirements are a bit of a pain too. Two years ago I was out of work so my wife put us on her company insurance. Open enrollment came in Nov 2014 and as we’d only been on her insurance for 3 months, assumed the plan would roll over into 2015. Bad assumption. Didn’t learn until April 2015 that we were uninsured after a routine doctor visit. Paid full retail for my prescriptions for 8 more months.
Can’t stand annual reenrollment. Just let me keep my policy
Still consider that a bullet dodged.
MomSense
Going to share this widely. You are a treasure. I wish more people had access to your information.
PowerMAD
Thank you for this! We “went naked” for about three years before ACA (Thanks, Obama! From the bottom of my heart!), and I did have a medical emergency during that time – still trying to pay off thousands of dollars of bills. The day the Exchange went live, I was on it like white on rice; this has been a mandatory expense ever since, but things hadn’t gotten as dire until last week.
Yes, we’ve been covered since January 1. Since I first wrote my question I got some unexpected semi-good news; a very small pension I had is being dissolved and I can elect a cash payout of about $10K that would arrive in late December. (The reason it’s only semi-good is b/c of the income tax implications – another burden I’ve been having a hard time with.) So I will probably hock something, or several somethings, to come up with the premium payment for November, since it looks like I’ll have the $$ for December and on into next year.
And thank you generally, Mr. Mayhew! Precisely because health insurance is soooo important, especially as we both get older, and because I make no claim whatsoever to understanding how it works, you have been a godsend, a lifeline, and a tutor all at once. Even now I can’t claim to completely understand what you wrote about the scenario where we can’t pay the November premium; are you saying that, like other bills (such as my car insurance), the insurance stays in effect for the 30 days following the missed premium provided I make the payment in that 30 days?
I ask for the clarification because one thing that keeps adding to our financial woes is the ugliness of the “gig economy.” I’ve had several clients blithely ignore the Net 30 on my invoices (one client, a major government contractor, simply sent notice to all its 1099s, as we’re called, that as of the next payment cycle it was moving from Net 30 to Net 45). That’s part of what created the immediate crisis; a client simply never even entered a four-figure invoice into its system in September, and when I called them last week b/c the payment hadn’t shown up was told I’d just have to wait until their next normally scheduled check run. So right now I haven’t paid the mortgage, the cellphone bill, the trash collection bill, the … Well, you get the picture. My credit is absolutely ruined. Some part of that is my fault, but overwhelmingly it feels like the financial system is geared toward trapping you in the whirlpool and slowly, inexorably drowning you.
Sorry for the aside. Again, thank you thank you thank you, Mr. Mayhew.
Richard Mayhew
@PowerMAD: You actually get a bit more time on the health insurance bill.
Let’s say the bill is due November 1st. You don’t pay it on November 1st. Your coverage is still in effect for all of November. If you never pay again, the insurer is on the hook for any/all claims but they can come after you for cost sharing and the November premium.
Now let’s say your December bill is due on December 1. You don’t pay it nor the November bill. Your coverage is still in effect. The docs/hospitals eat your claims. They can come after you for those costs while your insurer can come after you for the November and December premiums plus any November cost-sharing.
now let’s say you get your windfall and write a check for the November and December premiums to the insurer on December 28th. Your coverage gets reinstated and all the nasty phone calls stop in a couple of days as the December claims get adjusted to have the insurer pay the providers and you pay typical cost sharing.
So you actually get a bit of breathing room here.
Mnemosyne
@PowerMAD:
So many companies (including the Giant Evil Corporation I work for) have switched to paying everything Net45 that you should probably work on that assumption. It sucks, and I’m embarrassed every time I have to tell a small business that, but I’m a very small cog in the machine and no one listens to me.
If you have a decent relationship with someone at the company, see if there are any hacks that would allow you to get even partial payment sooner. For instance, if a vendor requires a 50 percent down payment, that gets paid immediately, and only the other half is subject to the 45 days.
PowerMAD
@Mnemosyne: Good suggestion! I’ve wondered, for my problem clients (’cause who can afford to turn away work, even from bad customers?), of requiring 50% upfront, balance due net 45.
Bobby Thomson
Nothing wrong with running naked. After all, we evolved to chase our prey long distances long before we discovered clothes. Some more well endowed women might want to keep a sports bra, though.
Oh, wait. You’re talking about the risks of going uninsured and paying the penalty? Carry on.
aidian
Mr. Mayhew — you’re work here is fascinating and you are a hugely valuable resource. But all your technical knowledge is no help here. The problem is an economy that would do this to someone like your questioner. The problem is American capitalism.