Signing up for healthcare coverage is an important step to take in protecting yourself and your family from financial expenses should a medical issue arise unexpectedly. However, simply signing up does not mean your coverage will begin immediately. If you are enrolling in a new healthcare plan, you can take the following steps to ensure that you remain protected throughout any gaps in coverage.
Health Insurance Marketplace Gaps
Health plans purchased through the Health Insurance Marketplace are calendar year plans. A 2015 plan, for example, lasts through December 31st, 2015. If you renewed the same plan for 2016 with the same insurance provider, your new insurance should have begun immediately on January 1st, 2016.
If you are unhappy with your insurance coverage, however, you may decide to switch to a lower cost plan, a plan with additional coverage, or a similar plan with a different carrier. You can review ACA-compliant plans and prices here.
When you sign up for a Marketplace plan during the Open Enrollment period, be sure to note the effective date of your new policy, as you may experience a waiting period between the date you sign up for a plan and the date your coverage begins.
- If you purchase a plan on or between the 1st and 15th days of the month, your new coverage will start on the first day of the next month.
- If you purchase a plan between the 16th and the last day of the month, your insurance will start on the first day of the second month.
For example, if you enroll in coverage on January 15th, your new coverage will begin on February 1st. If you enroll on January 16th, your coverage will begin on March 1st.
The last day to enroll in coverage for an effective start date of January 1, 2016 was December 17, 2015. This means that many people changing to a new healthcare plan in 2016 will face a coverage gap of up to 45 days.
Living without health insurance is a big risk. If your coverage gap is longer than two months in the same calendar year, you will be charged a fee that will be applied to your federal tax return for that year. In addition to the fee, you would also be responsible for all costs related to unexpected injuries or illnesses which, in many cases, can be significant.
Short-Term Medical Coverage
If you find yourself with a gap in coverage, it is vital to act quickly in order to mitigate any financial risk. Your best option in this situation is a short-term medical (STM) insurance plan. This temporary coverage serves to complement ACA-compliant health plans by bridging the coverage gap that occurs before your Marketplace coverage begins.
STM policies are not compliant with the Affordable Care Act and therefore do not allow you to bypass the ACA tax penalty. However, you can avoid this fee by claiming a "short gap in coverage" exemption if you have a short-term medical policy (or go without ACA-compliant coverage) for less than three months. This exemption applies only to the first "short coverage gap" in a calendar year, however.