Health insurance companies are regulated by the federal government and state laws. They have strict guidelines outlining how and when a health insurance policy can be canceled. Health insurance policies can be canceled at any time but not for any reason. The reason must follow guidelines set forth by the laws.
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Many people worry about losing health care coverage when they need it most. Until recently this fear was a reality that happened every day. Insurance companies had created loopholes by having policy holders sign documents that allowed the insurance companies to drop them from coverage if the person became seriously ill.
In 2010 the Affordable Care Act’s provision to ban this practice went into effect. These government regulations for health insurance companies banned the practice of canceling insurance policies when a person became ill. All health insurance policies written after September 23, 2010 must comply with this law.
What are the main reasons people lose health insurance coverage?
There are several reasons a health insurance company may drop your coverage. They are within their legal rights to do so, and in most cases do not have to give you prior notice of the cancellation. Health insurance companies are in the business to make money.
The most common reason people lose their health coverage is the loss of a job. If you are on a group health insurance policy and lose your employment, the company sponsored insurance will no have you on the policy. If your hours are reduced to part time and your employer does not offer coverage for part time employees you may lose your health insurance.
If your company is required to offer Cobra health insurance you may be able to extend your health insurance while you look for a new job. Cobra insurance allows you to keep your insurance coverage for up to 18 months as long as you pay 102% of the premiums.
Health insurance fraud is also for cancellation of your policy. This includes falsifying your application. If a company finds evidence of fraud they can drop you immediately and do not have to pay any claims filed on the policy. They may even file charges and demand repayment of past claims paid by them.
If you fail to pay your health insurance premiums, the company will cancel your policy. Most health insurance companies will provide you with a 60 day grace period before cancellation. They may also give you an opportunity to repay missed premiums to reinstate coverage. If you still fail to pay your premiums the company may pursue legal action.
What other reason will cause loss of coverage?
Health insurance companies may drop coverage for reasons beyond your control. These cancellations must be applied to all policy holders. Companies cannot use discrimination to selectively cancel policies or products.
If a health insurance company decides to stop offering a certain product or policy type they can cancel coverage for anyone using that product. According to the Texas Department of Insurance, health insurance companies must allow those customers the opportunity to purchase a new policy.
If health insurance companies are no longer able to pay claims coming in they must sell their policies or go out of business. In cases where a health insurance company goes under, a state assistance program may help pay outstanding claims. If another insurance company purchases those policies they must offer customers a comparable policy.
Can my employer cancel my health insurance policy?
Most states do not require employers to offer health insurance. If an employer offers you insurance they may be regulated by state laws unless they are self-funded. Regardless of how they operate their health insurance plan, a company can drop insurance for its employees at any time. The South Carolina Department of Insurance says that employers have the right to change coverage or drop coverage at any time.
Employers are not required to retain coverage after you are separated from the company. Your coverage can end as soon as your last day of employment. Companies with less than twenty employees are not required to offer Cobra insurance either.
If you are on Cobra and the company you worked for drops its employee insurance plan, you will no longer be eligible for either. Cobra is not insurance but a law that allows employees an opportunity to continue benefits to avoid a lapse in coverage.
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