If you fail to pay your premiums and exhaust the grace period for plans offered in a health insurance Marketplace, you will lose your insurance coverage. The grace period is either one month or three months long, depending on whether or not you’re receiving subsidies and whether or not you’ve paid at least one health insurance premium so far during the year.
The three-month grace period applies to those who receive federal subsidy assistance in the form of an advanced premium tax credit (APTC) and who have paid at least one full month’s premium within the benefit year 1 (as described below, there’s an exception to this rule when coverage is auto-renewed for the new year; the grace period can carry over from the end of one year into the next year, even if premiums have not yet been paid for the new year).
For those without a subsidy, the grace period is generally one month, although this can vary from one state to another, since it’s regulated at the state rather than the federal level. This applies to plans purchased on-exchange without a subsidy, as well as plans purchased outside the exchange, since none of those plans qualify for subsidies.
For enrollees who are not receiving subsidies, if payment is not made before the end of the grace period (typically one month), coverage will be retroactively terminated to the end of the month for which a premium was last paid.
For enrollees who are receiving subsidies (and who have effectuated their coverage by paying at least one month’s premium), if their premiums go past three months overdue, the coverage will be terminated retroactively to the end of the first month of the grace period. So if a subsidized enrollee pays the January premium but then doesn’t pay February, March, or April, the coverage would then be terminated as of the end of February.
To keep coverage in place past the end of the grace period, you have to be fully paid up by the end of the grace period. In other words, the grace period does not allow people to be perpetually three months behind on their premium payments. If you get behind on your premiums (and you’re receiving subsidies), you’d need to fully pay premiums for all three months of the grace period to retain your coverage.
If your coverage is terminated back to the end of the first month of the grace period due to non-payment of premiums, it’s important to note that you’re not eligible for a premium tax credit (subsidy) for that first month of the grace period if you didn’t pay your share of the premium for that month. New York State of Health, the state-run Marketplace in New York, explains this with an example in question 12 of their FAQs about Form 1095-A (APTC reconciliation is done by the IRS, and does not vary from state to state, but we’ve linked to NY’s FAQ because it’s a good illustration of how this works).
So the premium tax credit that was paid on your behalf for the first month of the grace period will need to be paid back when you file your taxes, assuming you didn’t pay your share of the premium for that month. Here’s more about how APTC repayments work.
Individuals who lose coverage in the Marketplace due to non-payment of premiums will not be able to rejoin a marketplace health plan until there is a new open enrollment period, unless they experience a qualifying event (and most qualifying events have a prior coverage requirement; most are designed to allow a person to change coverage, rather than go from being uninsured to insured). During the time that you’re uninsured, you’ll be responsible for paying any medical bills that you incur.
Open enrollment allows people a chance to start over each year with new coverage, regardless of whether the prior year’s coverage was terminated during the year due to non-payment. This became true again as of 2023 regardless of past-due premiums, after some restrictions that applied for several prior years.
The market stabilization rules that were finalized by HHS in 2017 made some changes that allowed insurers to recoup past-due premiums when people tried to re-enroll during open enrollment. But HHS finalized a reversal of those rules as of 2023.
The 2017 rule is described in more detail here, but essentially, if your coverage was terminated for non-payment of premium and you then enrolled in a plan offered by that same insurer within 12 months of your prior plan’s termination, the insurer could require you to pay your past-due premium before effectuating your new policy. And the insurer could refuse to effectuate your new policy if you didn’t pay the past-due premium. But again, that rule was no longer applicable as of the 2023 plan year, under new rules that took effect in mid-2022. 1
Here’s how it worked under the 2017 rule:
In June 2021, HHS noted that they were reconsidering this rule to determine “whether it may present unnecessary barriers to accessing health coverage.” The Notice of Benefit and Payment Parameters for 2023, issued in May 2022, called for the rules to return to the way they were before the Market Stabilization Rule. In other words, insurers are no longer allowed to apply premium payments to past-due premiums if a person enrolls in the same plan, or another plan issued by that insurer, during open enrollment. 1
But HHS does note that insurers can still send past-due premiums to collection agencies. Again, this should not be more than one month of premiums in any case. A person who had a three-month grace period would owe one month of past-due premiums and would also have to repay the IRS for that month of premium subsidies. But a person who wasn’t receiving premium subsidies would find that their coverage was terminated back to the last day that they had paid for their coverage, meaning that there is no longer any past-due premium once the 30-day grace period expires.
HealthCare.gov enrollees who are in the grace period at the end of the year need to be aware that the grace period does not reset at year-end if the plan is auto-renewed.
So for example, if you didn’t pay November and December premiums, and then your plan is auto-renewed for January, you can’t just pay January’s premium to keep your coverage going for the coming year. You’d have to pay all three months (November, December, and January) by the end of the three-month grace period that began when you missed the November payment. The total amount has to be paid in full by the end of the grace period, or else your coverage will be terminated back to the end of November (this is the same system that would be used regardless of the time of year that the non-payment of premiums occurs).
However, if you enroll in a different plan for the coming year (rather than letting your plan auto-renew), your old plan would terminate back to the end of November, and your new plan would start January 1, as long as you pay January’s premium.
Although a person generally has to have made at least one premium payment during the current benefit year to be eligible for a grace period, that is not the case if they’re in a plan that has been auto-renewed. CMS has clarified (see Section D, “Termination of Coverage or Enrollment for Qualified Individuals (§ 156.270)”) that if a person’s plan is auto-renewed — either the same plan, or a crosswalked plan — that’s considered the same plan they already had, meaning that it has already been effectuated and the same grace period is available as would be available at any other time of the year.
So for example, consider a person who is receiving a premium tax credit, has paid for their coverage through December, and is auto-renewed for the coming year, but then fails to make their January premium payment. Although they haven’t made a payment in the current benefit year, they are still eligible for the same three-month grace period that they would have been eligible for if their premium lapse had happened a few months earlier.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.
