Why Not Wait Until I'm Sick to Buy Health Insurance?

Waiting Until Your Sick Might Be More Expensive

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Health insurance is expensive, so why not just wait and buy health insurance when you need it? Why pay months of premiums when you might not need to use it?

Since Affordable Care Act rules require you to buy health insurance from a corporation, rather than the single-payer government supported system found in most developed countries, it may seem cheaper and safe to delay buying it until you need it.

BBut, there are compelling reasons not to wait.

Open Enrollment Isn't Open-Ended

You can only buy health insurance in the individual market (which includes through the health insurance exchanges as well as outside the exchanges) during open enrollment, a period of time when everybody can buy health insurance.

If you don’t buy your health insurance during open enrollment, you’ll have to wait until the next open enrollment for another opportunity. If you get sick in the meanwhile, you’ll probably be out of luck.

The period of open enrollment has become shorter. Starting with 2018 coverage, open enrollment will be only about six weeks long, running from November 1 to December 15 each year, with coverage effective January 1 of the coming year (for 2018 coverage only, there are nine state-run exchanges that have extended open enrollment past December 15).

For 2014, when ACA-compliant plans were just getting started, open enrollment lasted six months.

For 2015 through 2017, open enrollment was three months each year.

Exceptions to Open Enrollment

Situational changes in your life (but not changes in your health status) will create a special enrollment period during which you can buy health insurance or change your health plan. These qualifying events include:

  • Losing access to your existing health insurance plan for reasons other than non-payment of premium or fraud (for example, leaving your job and losing access to your employer-sponsored insurance). 
  • Gaining a dependent or becoming a dependent. Getting married, having a baby, or adopting a child are examples.
  • Permanently relocating can create a special enrollment period. This also applies to people being released from prison. but since mid-2016, this has only applied if you were already insured in your previous location—you'll have an opportunity to change insurance if you move, but not to obtain coverage for the first time.

Special enrollment periods are time-limited, and you've only got 60 days from the date of the qualifying event to enroll in a new plan.

Health Insurance Waiting Periods

Health insurance coverage doesn’t take effect the day you buy it. Whether you're insured through work or through a company you found on the health exchange, there is usually a waiting period before your coverage kicks in. For example:

  • If you sign up during autumn open enrollment your coverage will start on January 1st (note that in the nine states that have extended open enrollment for 2018 coverage only, there are some exceptions to this)
  • If you're signing up outside of open enrollment (using a special enrollment period) and you enroll before the 15th of the month, your coverage will start at the beginning of the next month
  • If you enroll after the 15th of the month, your coverage won't start until the beginning of the second following month. For example, if you experience a qualifying event and sign up on March 25, 2018, your coverage won't take effect until May 1, 2018 (unless your qualifying event is loss of other coverage or marriage, in which case special rules apply to the effective date, and your coverage could be effective April 1, 2018; note that in all cases, you can get coverage effective for a new baby or adopted child retroactive to the date of birth or adoption as long as you enroll before the special enrollment period ends).

    Health Insurance for Unforeseen Circumstances

    It's a bad plan to wait to buy health insurance until you need to use it. Even if you’re young and healthy, bad things can still happen.

    What if you sliced your hand when a wine glass broke as you were washing it? Stitches in an emergency room can be very expensive. What if you tripped over the cat while walking down stairs? A broken ankle can’t wait for treatment and might even require surgery.

    Even if something like this happens when you're able to enroll in coverage right away (during open enrollment or during a special enrollment period), your coverage wouldn't take effect right away. It's doubtful that you'd want to wait around for weeks to go to the emergency room. You'd have to wait months just to enroll.

    The Expense of Health Insurance

    The most common reason people give for not having health insurance is that it's too expensive. But the ACA has helped to make coverage much more affordable for people with low and mid-range incomes.

    If your income was less than about $16,642 in 2017 (for a single individual), you may qualify for Medicaid. It depends on whether your state has expanded Medicaid, but 31 states and DC have thus-far opted to expand Medicaid under the ACA.

    If your income is too high for Medicaid but up to four times the poverty level, you may be eligible for subsidies to cover a portion of your premium in the exchange. The upper income limit in 2017 for subsidies for 2018 coverage for a single individual was about $48,240—certainly well into the middle class for a single person (for a family of four, the income limit extends all the way to $98,400).

    To qualify for subsidies, you must buy your health insurance through the exchange. You can either take the subsidies up-front, paid directly to your insurance carrier throughout the year, or you can pay full price for your coverage and then claim your subsidy on your tax return.

    Catastrophic Plans

    If you're younger than 30 years old, or if you have a financial hardship, you may be eligible for a catastrophic health plan. Although these plans have the highest deductibles and out-of-pocket costs allowed under the ACA, their premiums are lower than the other available options, and at least you’ll have some coverage.

    Catastrophic plans cannot be purchased by people over 30 unless they have a hardship exemption. And it's also important to note that subsidies cannot be used to help pay for catastrophic plans, so they're generally not a good choice for anyone who qualifies for subsidies based on income.

    Sources:

    Dates and Deadlines for 2018 Health Insurance. HealthCare.gov. https://www.healthcare.gov/quick-guide/dates-and-deadlines/ .

    PPACA, Amendments to Special Enrollment Periods and the Consumer Operated and Oriented Plan Program. Department of Health and Human Services. https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-11017.pdf.

    Special Enrollment Period (SEP). HealthCare.gov. https://www.healthcare.gov/glossary/special-enrollment-period/.

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