What Is a Health Insurance Grace Period?
A health insurance grace period is a specified duration after a missed premium payment during which the policy remains active, offering coverage despite the overdue payment. During this health insurance grace period, your coverage typically continues as usual. But if you do not pay your insurance premium during the grace period, you could lose coverage or get stuck with denied claims for medical care.
The details of your health insurance grace period depend on your insurer, plan, and state of residence. For example, in Texas and Wisconsin, state law requires insurers to extend a grace period of 7 days for a week-based policy, 10 days for a month-based policy, and 31 days for other policies. If you fail to pay your owed premiums (both past and present) within the provided grace period, your insurance coverage will likely be discontinued.
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How Do Premiums Work?
Paying your premium, or the monthly cost of your insurance plan, ensures your coverage stays active and you do not fall into a grace period. Here’s more on how premiums work.
What Is a Premium?
A health insurance premium is the amount you must pay monthly for your health insurance plan. Some plans, such as Medicare Part A (for most beneficiaries), feature $0 premiums. However, even if you do not pay a premium, you’ll still pay copays, coinsurance, and other out-of-pocket costs.
You must pay your premium for your health insurance plan to become or stay active. Once you enroll in a health plan, your coverage typically becomes active the month after you pay your first premium. At that point, your insurer will send you information on using your plan and insurance card.
How Are Premiums Paid?
If you have an employer-based health plan, your share of the premium will probably be deducted from your paycheck. If you have Medicare, any plan premiums should be deducted from your Social Security payment.
If you have a Marketplace health insurance plan, you can pay your premiums directly to the insurer by phone, by mail, or online, depending on the provider. In many cases, you can set up recurring payments to be deducted automatically from your checking account or charged against your credit card.
However, if you run low on funds in your account, your card expires, or your bank puts your card on hold, you might miss paying your premium. A “bounced” premium payment can lead to a missed premium payment and entering a grace period.
When Are Premiums Due?
Depending on the insurance provider, your payment could be due on a specific date, such as the 1st or the 15th of the month. Or, to continue coverage into the next month, your premium may be expected by the end of the previous month.
If you’ve just signed up for a health insurance plan, you must pay your premium before you’re considered enrolled and the coverage begins. Generally, if you buy a Marketplace plan during Open Enrollment, you must pay your premium by Dec. 15 to get coverage starting Jan. 1.
What Happens if You Do Not Pay Your Premium?
Your insurer will notify you about your late, declined, or missed payment. The insurer will continue contacting you throughout the grace period to inform you that you must pay your premiums or lose coverage.
If you still do not pay your premium, your insurer will send a written notice that your premium has not been paid, laying out the following:
- The final deadline or due date for all amounts owed
- The balance of the amounts owed
- Ways to pay your bill or contact customer service
- What will happen if you don’t pay your premium
Depending on your plan, you may lose access to coverage, have to pay out of pocket for claims made during your grace period, or lose the ability to enroll in the same or another health plan.
What Is a Premium Credit?
An important protection is offered to consumers who buy a health insurance plan on a state or federal Insurance Marketplace. If you purchase a Marketplace plan and receive advance premium tax credit payments, you’re typically entitled to a 90-day grace period. Information on your income and family size helps determine whether you qualify for advance premium tax credit payments.
If you receive a premium credit for your first month of coverage, your insurer will continue to process and pay claims for covered services even if you do not pay your premium. However, in the following months, your insurer may hold and not pay your claims until you’ve sent in your premium payments.
This 90-day or three-month grace period typically overrides the state’s law around grace periods. To qualify, you must have paid at least one full month’s premium during the current insurance year.
What Happens if You Do Not Pay All Owed Premiums by the End of the Grace Period?
If you do not pay the premiums you owe by the time your grace period expires, the following could happen, depending on your plan:
- Your plan could be canceled, and you will be disenrolled from the plan.
- You could be responsible for all care costs, including for claims submitted during and after the grace period.
- The insurer may try to recover any payments it made for your claims during the grace period.
- You may not be able to re-enroll in an insurance plan until the next open enrollment period or special enrollment period.
If you do not pay your past-due premiums by the deadline, you’ll likely be automatically unenrolled from your plan. You may not be able to sign up with that specific insurance provider again until you’ve fulfilled any past-due premium payments.
How Different Types of Health Insurance Handle Grace Periods
Typically, insurance companies handle grace periods differently based on your specific plan, the state the insurer operates in, and where you bought the plan.
Private Health Insurance
If you buy private health insurance through the health insurance Marketplace, you’ll benefit from several protections. For example, if you receive financial assistance for paying your premiums, you could be eligible for a 90-day grace period.
If you do not receive financial assistance or you have a short-term insurance plan, your grace period may differ and be much shorter, such as 30 or 60 days. For Marketplace health insurance plans, the insurance company must give you notice of at least 30 days before canceling your coverage for nonpayment.
If your insurance company cancels your plan or claims you did not pay your premium when you feel you did, you can appeal the decision.
Employer-Sponsored Health Insurance
Typically, your plan administrator handles premium payments with an employer-sponsored group health insurance plan. Your premium may be deducted from your paycheck or paid by your employer, who subscribes to a group health insurance plan.
However, employer-sponsored health insurance plans may have much shorter grace periods than Marketplace plans. For example, with a group health plan, you may have only a 10-day grace period after missing a payment. Your coverage could be canceled if the plan’s total subscription cost is not fully paid within that window.
Medicaid
Medicaid is a government-sponsored healthcare program administered by U.S. states for low-income adults and children. Because Medicaid programs vary by state, your grace period and consequences for missing payments depend on your state of residence.
Typically, a Medicaid grace period is 30 to 90 days for both the initial and subsequent premium payments. If you do not fulfill your owed payments during the grace period and are unenrolled from your Medicaid plan, the consequences may vary and could include:
- No consequences
- Being turned over to a collection agency
- Garnishment of tax returns or lottery winnings
- Being demoted to a simpler plan
- Being required to make copayments
Some states allow you to re-enroll in Medicaid after you’ve paid all overdue premiums, while others may make you wait to re-enroll.
Medicare
Medicare is the federal government’s health insurance plan that covers adults 65 and older, along with some younger people with certain health conditions. If you have Medicare, your monthly insurance premium should be deducted from your Social Security payment.
If you fail to make premium payments for your Medicare plan, your provider must give at least two months’ notice before canceling coverage. If you do not pay your Medicare premium within this two-month grace period, your plan may disenroll you. This applies to both Original Medicare and Medicare Advantage.
Medicare beneficiaries may face lasting penalties for missing premium payments and losing coverage. For example, if you lose drug coverage for 63 days due to not paying your premium, you may pay a monthly penalty for prescription drug insurance for the rest of your life.
What Happens if You Do Not Pay the Premium for the First Month?
When you sign up for a health plan, your insurance company should state how soon you must pay the first month’s premium. For example, you may need to make an initial premium payment within 45 days after you send your information to the insurance company you’ve chosen or select a plan through the Marketplace.
In most cases, if you do not pay the first month’s premiums, you will not be officially enrolled in your chosen health insurance plan.
How To Avoid Grace Periods
Falling into a health insurance grace period can happen to even the most careful consumer. To avoid this situation, try the following:
- Ensure you know your insurer’s grace period for your plan. Your insurer should describe details about its grace period, including the length of time and any rules, in its benefit guide. You may choose an insurer with a more extended grace period, if available, in the future.
- Know your payment deadlines. You should know when premium payments are due every month. You’ll know to investigate further if the premium does not come out of your account on time.
- Ensure automatic payments. It’s easy to forget a bill during a busy month. Setting up automatic payments ensures your premium gets paid. However, remember that a debit or credit card hold or low account funds could still lead to a rejected automatic payment.
- Read any insurer communications sent to you. If your automatic payment does not go through, your insurer will work hard to ensure you receive notice. Your insurer may notify you by email, phone, text, or mail that you missed a payment.
- Pay your late premiums as soon as possible. Use a secure payment method to catch up on your missed premium payments. If you’re struggling to pay for financial reasons, contact your insurer to discuss your options.
All in All
Not paying your health insurance premium may result from unexpected cash flow issues or a payment method not working. No matter the cause, you’ll get a short window of time with uninterrupted insurance coverage to allow you to catch up on missed payments.
To avoid missing premium payments, ensure you note all deadlines and track your payments to make sure they go through.