If you have had trouble sleeping, worrying about health insurance retroactive terminations, you are probably a provider and not a patient. But the cost of such terminations can fall heavily on the shoulders of patients as well.
When a health insurance plan terminates, it usually does so at the end of an upcoming month. This is for a variety of reasons, the most common of which are scheduled termination of the plan and termination of employment, since in both those circumstances premiums are paid through the end of the month.
There are, however, some notable (and increasingly frequent) exceptions.
The most common exception used to be employment terminations that occurred during the first few days of a month. Some insurance policies sold to employers have provisions that if an employee is terminated (voluntarily or otherwise) within the first few days of a month, the policy terminates retroactively back to the last day of the previous month. This is done to protect the employer, so that an employee who quits on the first day of a month doesn’t get his premiums wholly paid by the employer, even though he is no longer working there. Sometimes, however, employer-based policies are sold which allow termination of the health plan immediately upon termination of employment. And in either situation, the employer has a given period of time (which varies by carrier) in which to report the earlier termination to the health insurance – something known as retroactive termination.
In many cases, employees often do not know about these provisions, and they continue going to the doctor with their old insurance, unaware that their plan was, or is about to be, terminated. And if the plan has not yet been notified, it will appear to the provider and the insurer that the plan is still in force, even though it really is not.
Today, the most common exceptions are plans which were purchased on the healthcare exchanges. By law, under the Affordable Care Act (AKA the ACA or ObamaCare), the first month’s premium needs to be paid before the policy is issued each year, but the premiums for the second and third months are deferred and need only be paid by the end of March. Failure to make that payment results in the plan being retroactively terminated back to January 31st.
In cases of retroactive termination, claims are paid by the health insurance plan, and then later on they withdraw the payment from the provider when claims are audited internally. This can happen very quickly, or can be a year or more later.
When the payment is taken back by the carrier, providers will turn the entire balance over to the patient—not only is the amount that was taken back due, but the entire amount of the charge now falls to the patient’s financial responsibility.
When this happens, patients are often surprised, particularly when they didn’t know about their plan’s termination provisions. But even if the patient subsequently had other insurance coverage that was active at the time of service, if the takeback is beyond that new insurance’s timely filing deadline, the new plan will not pay, and the patient will be stuck with the bill.
This can feel very unfair to the patient, but (and I know patients don’t like hearing this) it also feels unfair to the provider. The patient feels like they should have been told—and they should have been by their employer; it is not the doctor’s fault. The provider feels cheated, because the patient doesn’t want to pay the bill, a process that can drag on for some time—and the provider shouldn’t have to give away services and supplies for free.
Retroactive terminations are an unpleasant experience. Therefore, if you have a healthcare exchange plan, be aware that delaying payments for your February and March premiums may result in even larger bills later. And if you obtain your health insurance through your workplace, be sure you understand the terms of your plan, so that you know your rights and obligations should you move on to another job.
But most importantly, check your mail. Upon termination, your health insurance will mail you a notification letter. If that letter is unexpected, follow up immediately with your insurer (and your employer) as well as any provider whom you saw after the date on the letter, to help you avoid even more unpleasant surprises later on.
If you have an issue you would like addressed in an upcoming Your Clean Bill of Health column, or if you would like to share an anecdote or unusual case you experienced, write to [email protected].
By Yossi Faber
Yossi Faber earned his MBA in healthcare magna cum laude from the joint Mount Sinai School of Medicine—Zicklin School of Business program at CUNY Baruch. He is a member of two healthcare industry-focused networks of expert professionals, and is an invited lecturer at major medical centers and state medical societies. He founded and manages Clean Bill of Health (www.cleanbillofhealth.com), which provides both medical billing services to physicians as well as advocacy services for patients to review and help reduce the burden of their medical bills. Yossi lives in NJ with his wife and children.