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What happens if my health insurance coverage lapses?

The lowdown...
  • You have several options to enroll in a new health plan if your coverage lapses
  • If your health insurance coverage lapses due to a change in employment status, you should be entitled to COBRA insurance
  • If your health insurance lapses due to nonpayment, you do not qualify for re-enrollment under a special enrollment period under the Affordable Care Act. However, there are still many options available to you
  • If you only went without health insurance for less than three full months, you will qualify for a short coverage gap exemption and will not be required to pay the penalty fee for not having health insurance

If you leave your job or lose your full-time employment status, you have the option of temporarily continuing your health insurance under the Consolidated Omnibus Budget Reconciliation Act (COBRA.)

However, you do have to pay into your COBRA insurance and it is often much more money a month than you were previously paying under your employer group plan. However, it can be a convenient and necessary expenditure when your health insurance first lapses or when you find yourself in the difficult situation of unexpectedly losing your job.

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How long does COBRA last?

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COBRA coverage is available for qualified beneficiaries, in addition to their dependents and spouses, for up to 18 months after being let go from a job or having hours reduced and facing the possibility of a lapse in coverage. The coverage availability extends to 29 months for those employees who are considered medically disabled during the first 60 days of their COBRA coverage.

This extended availability also applies to dependents of disabled beneficiaries, even if the dependents are not disabled.

If you are a spouse or dependent of an employee and are going to lose their employer-based coverage due to their death, a divorce, or certain other life events, you may qualify for up to 36 months of COBRA coverage.

Most group health plans offered by your employer are subject to COBRA’s provisions. Some small employer plans and federal government group plans are not subject to COBRA coverage.

Health Insurance Lapse due to Nonpayment

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If your health insurance lapsed due to nonpayment, you are not eligible for COBRA coverage or a special enrollment period on the Health Care Marketplace. However, if it is during the open enrollment period between November 1, 2016 and January 31, 2017, you are eligible to enroll in a new plan through the Marketplace.

If not during the open enrollment period, you can try contacting your insurance company and asking them to reinstate your plan.

There is usually a period of time in which your insurance company will allow you to make up the missed payments. The law requires your insurance company to give you at least 30 days before completely canceling your coverage.

Depending on the circumstances in your life that caused you to miss your payments, such as a change in household size or residence you may qualify for a special enrollment period.

You may also be able to get short-term health insurance to help cover your medical visits and your health. However, if the short term health insurance you get does not meet the minimum essential coverage requirements set forth by the Affordable Care Act, this coverage will not exempt you from the penalty fee.

Other Options

There are some additional options that may be available to you if your insurance lapses, particularly if the lack of payment was due to financial hardship.

You may qualify for Medicaid or CHIP coverage based on your modified adjusted gross income.

Short Coverage Gap Exemption

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If your health insurance coverage lapsed for only a short period of time, you may qualify for a short coverage gap exemption and not be responsibility for paying the fee.

You will need to have been without coverage for less than three full months in a row to qualify for this exemption. You can only claim this exemption once in any given year.

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