The Centers for Medicare and Medicaid Services (CMS) have included in their recent ruling an incentive to maintain continuous coverage. They’re incentivizing individuals to keep their policy, or rather they’re penalizing people for dropping coverage. If someone goes a few months without coverage, then they’re going to have to pay more for coverage when they get a new plan – more than what they would have had to pay if they would have simply kept their plan. The penalty is speculated to be a 30% rate increase for those who don’t keep continuous coverage. However, that figure may or may not change.
For example, let’s say I had health coverage through my employer, starting in January. For whatever reason, I left my job, leaving me without health coverage. Since I can’t afford COBRA, I decide to go without health insurance. In actuality, I should use a special enrollment period since leaving a job and losing group coverage is a qualifying event. For the sake of the example, let’s say I don’t enroll in a qualified health plan during the allotted 60 days of my special enrollment. Then, open enrollment begins in November so I finally enroll in a plan with a January 1st effective date. However, if I left my job in June, then that means I went six months without coverage. Now, my new plan will charge me more in premium for not having continuous coverage. Knowing I’ll have to pay more for coverage should incentivize me to maintain coverage; it should also prompt me to enroll in a new plan quickly. Don’t procrastinate; if you have a special enrollment period, use it.
Much like the individual mandate, which penalized people for not enrolling in qualified healthcare, this new rule penalizes people for not keeping their qualified healthcare. By instituting this new rule, CMS is hoping to bring balance back to the risk pool. It keeps people from gaming the system and only getting coverage when they’re sick and then dropping it when they’re healthy. As it now stands, people are essentially calling the insurance company before calling an ambulance.
Bottom line: They want to keep people continuously covered because it keeps money coming into the carriers. If carriers don’t have money, they can’t pay claims. And if they can’t pay claims, then they have to leave the market, which leaves consumers without options.
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