Wednesday, August 26, 2009

Playing Chicken with Health Insurance

Health insurance policies have "grace periods" to accomodate for late-payers. Generally, these are 30 days; that is, one has 30 days to get the premium in to the carrier in order to keep coverage in force. If there's a claim during that time, it's put "in limbo" until that premium's received.
I'm not a big fan of playing chicken with them, but occasionally there's a good reason to take a bit of a chance. For example, if one is switching carriers, and the new plan isn't through underwriting yet, sometimes I'll recommend holding off payment for a few days to avoid double-coverage or waiting for a refund. I'm a bit leery of this, but for a few days, I haven't found it to be a big deal.
But that is quite different than what one client is proposing:
John and his family are clients, and I have them with an individual plan with XYZ Mutual. John's wife has started a new job which includes group coverage for the family; that coverage is set to "go live" on October 1. John is considering not paying the September premium (recall that September has 30 days), and taking his (and his family's) chances that no claims will arise. If they do, he figures, he can always send in the September payment, and everything will be hunky-dory.
As an aside, HIPAA requires that there be no break in coverage longer than 63 days, so the 30 days "bare" isn't likely to be an issue on that score.
In the event, I have strongly recommended against this strategy. Why, you ask?
Simply this: let's say that everybody's fine all the way to the end of the month, and on September 29th, John has a massive heart attack. There is simply no way for them to get the premium into XYZ Mutual before the GP is up, and so he's completely uninsured for that claim (and if the wife's not actively at work come October 1, it's likely that the group plan won't go into effect then, either). So he's completely on his own with regard to all the ER and ICU services, any ambulance and/or EMT services, nursing care, the whole nine yards. And since he's uninsured, he's not eligible for the insurance company's negotiated (discounted) rates, either, which means he pays full retail for everything.
There is no "up" side to this, save for the comparatively few dollars the September premium represents. I've explained all these issues, so it's out of my hands. Obviously, it's more likely that they'll be fine than not, but why take that chance? After all, isn't that what insurance is for?
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