What Is Automatic Renewal of Health Insurance & How Does It Work?

Whether From an Exchange or a Job, Your Health Plan Might Be Auto-Renewed.

If you don't participate in open enrollment, your health insurance can be automatically renewed, even if the premiums or deductible changes. Image © KLH49/ E+ Collection/ Getty Images

With health insurance automatic renewal, if you ignore open enrollment notices and do nothing when your health insurance policy is expiring, you’ll automatically be signed up for your current health plan for another year.

Automatic renewal is common in job-based health insurance provided by large employers. Federal government employees also have their health plans automatically renewed if they don’t take action during open enrollment.

What about individual and family plans sold through the Affordable Care Act’s health insurance exchanges? The Department of Health and Human Services has announced that it will automatically renew health insurance plans bought on the federal government’s health insurance exchange, HealthCare.gov. Health insurance exchanges run by individual states may also auto-renew health insurance policies.

How Automatic Renewal of Health Insurance Works

When you buy a health insurance policy, whether through a health insurance exchange, your employer, or a private insurance broker, you’re buying that policy for a limited time, usually one year. At the end of the year, the policy expires. However, because you still need health insurance and health insurers still need customers, most health plans encourage you to renew your policy for another year.

With Affordable Care Act health insurance exchanges and large employers, all of the health insurance policies are renewable once a year during open enrollment.

Open enrollment is also your chance to change to a different health plan if you don’t like your current plan. Without automatic renewal, if you don’t renew or change your health insurance policy during open enrollment, you won’t be able to sign up for health insurance again until the next year’s open enrollment.

You’ll be uninsured for an entire year because you didn’t do anything during open enrollment. (There are rare exceptions to this rule if you qualify for a special enrollment period.)

However, with automatic renewal, if you don’t renew your health insurance policy or choose a replacement policy during open enrollment, your health insurance exchange or your employer assumes you wish to keep your current health plan. Your enrollment will automatically be renewed in the same health plan for next year so you aren’t uninsured.

What if you’re subject to automatic renewal but your current policy isn’t being offered next year? Things get a little confusing here. If your health insurance is through the federal health insurance exchange, it will automatically enroll you in a “similar” health plan. If your health insurance is job-based, how this situation is handled depends on your employer. Many employers will send out a notice saying something to the effect of “XYZ health plan will no longer be offered.

If you currently subscribe to XYZ health plan and don’t choose a different plan during open enrollment, you’ll automatically be enrolled in ABC plan.”

While automatic renewal does prevent people from accidentally becoming uninsured because they forgot to renew their health insurance policy, it also presents some problems.  Learn more about these problems in “Pros and Cons of Health Insurance Automatic Renewal.”

Don't Want Your Health Plan to Be Automatically Renewed?

To avoid automatic renewal, make sure to participate in open enrollment each year. You can renew your current plan if you want to, you can comparison shop among available plans and switch to a new plan, or you can cancel your health insurance all together.

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