Why you can't buy health insurance whenever you want


Donna FreedmanBlog author Donna FreedmanLongtime personal finance writer Donna Freedman lives and writes in Anchorage, Alaska.

Published|5 min read

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Once upon a time, you could apply for health insurance whenever you needed it. But that didn’t mean you’d get it. You had to go through underwriting, and a pre-existing condition, like asthma or diabetes, could keep you from being accepted. Or you could be charged more for your coverage, or have that condition excluded from the policy.

That changed once the Affordable Care Act went into effect. Commonly known as “Obamacare,” the ACA requires insurance companies to provide coverage regardless of health status. That’s true whether you get insurance at work, buy a plan through the health insurance marketplace or purchase directly from an insurance company.

Another change: With few exceptions, you can now purchase insurance coverage only during an annual “open enrollment” period, which is Nov. 1 through Dec. 15 for plans on the marketplace; employer open enrollment periods are usually around the same time. A short annual enrollment was designed to prevent something called adverse selection.

Obamacare is based on the idea of everyone having health insurance. Theoretically, all customers would pay monthly premiums but healthy people would file fewer claims – making up for the higher costs for people who are chronically or critically ill.

In an adverse selection scenario, some healthy people might decide to roll the dice and not get insurance at all, or at least wait until they needed health care. Until then, they’d pay $0 in premiums. As a result, insurance companies might raise their rates to make up for having to pay out so many claims. This, in turn, could cause some healthy people who bought insurance to drop their coverage because it costs so much. This would leave a sicker and more expensive pool of people paying higher and higher premiums. A limited enrollment period helps prevent this by limiting the number of people who sign up right after they get sick or injured.

So once the open enrollment window closes at work or on the marketplace, you’ll usually have to wait a whole year to apply for health insurance. However, there are a few exceptions.

What are the exceptions?

Twelve states and the District of Columbia run their own health care exchanges. Some of these states have longer open enrollment periods, sometimes extending into January. Read our state-by-state guide to open enrollment to learn the deadline in your state.

You could be eligible for a special enrollment period if you’ve had a qualifying life event in one of three categories:

Loss of coverage: Being fired or laid off; quitting a job; turning 26 and aging out of a parent’s insurance plan; losing eligibility for student health care; discontinuation of an individual or marketplace plan or COBRA coverage; losing eligibility for Medicare, Medicaid or CHIP (Children’s Health Insurance Plan)

Change in household: Getting married or getting divorced; being legally separated; spousal abandonment (being a survivor of domestic abuse or being unable to find your spouse); giving birth, adopting a child or gaining a dependent in some other way (such as child support); losing a dependent (such as placing a child into foster care or adoption); the death of someone on the plan if it leaves you ineligible for that plan

Residence/status change: Moving to a different ZIP code or country; moving to the United States from another country or a U.S. territory; moving to or from the place you attend school; moving as a seasonal worker; leaving a shelter or some kind of transitional housing; joining a federally recognized tribe; becoming a citizen or earning “lawful presence in the U.S.” (such as a green card or permanent residence); being released from jail or prison

You generally have up to 60 days after a life event to apply for coverage.

Finally, you might qualify for a special enrollment period under extraordinary circumstances, such as a natural disaster or a serious medical condition. No matter what the life event, you’ll need to document it. “They are pretty strictly enforced now. You have to show proof,” says Louise Norris, a health insurance agent based in Colorado Springs, Colorado and author of “The Insider’s Guide to Obamacare’s 2020 Open Enrollment.”

What if I don’t have a qualifying life event?

If you missed open enrollment and aren’t eligible for a special enrollment period, you still have a few options.

Medicaid: This federal and state insurance program is open year-round. Eligibility is based mostly on income, pregnancy, disability, age and household circumstances. Three dozen states and the District of Columbia cover all residents who earn less than 133% of the poverty level. (Learn more with our state-by-state guide to Medicaid.)

Off-exchange insurance: Some private insurers sell these plans year-round. While they adhere to ACA rules, they aren’t eligible for premium subsidies.

Short-term health plans: Unregulated by the ACA, these are more of a stopgap measure until you can get into a regular health plan. Short-term health plans don’t provide full coverage and may not cover pre-existing conditions. (Shop for and compare short-term health insurance plans with our partner Agile Health.)

Health care sharing ministries: These faith-based alternatives aren’t regulated by the ACA or subject to its rules. Members pay a monthly sharing amount, analogous to a premium, and agree to abide by ministry rules, such as attending worship services or avoiding “non-Biblical lifestyles and choices.”

Should I skip insurance altogether?

As noted, there’s no longer a penalty for being uninsured. Keep in mind, though, that even a relatively minor illness or injury could result in a massive medical bill. Medical debt can wreak havoc on your finances.

People who believe they don’t need insurance often don’t understand the potential costs, Norris says. Her father was healthy and had never missed a day of work in his life until 20 years ago he developed an autoimmune disease that cost nearly $1 million dollars to treat. The bills would likely be much, much higher today.

“It has definitely influenced my perception of our health care system,” Norris says. “You don’t go without coverage.”

Obamacare and the other options listed above may seem expensive. Paying cash for medical care could wind up costing a lot more. Consider the pros and cons carefully before risking going without coverage.

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Blog author Donna Freedman

Longtime personal finance writer Donna Freedman lives and writes in Anchorage, Alaska.

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