Guaranteed Issue and Renewability

The Affordable Care Act (ACA) requires health insurance companies to issue a policy to anyone who applies (below the age of 65) and pays the premiums. The insurance company cannot charge a higher premium due to the applicant's health status or health history. A person with pre-existing conditions will not be charged higher premiums than a person who is in perfect health.

The Affordable Care Act (ACA) requires health insurance companies set the premiums for males and females the same, i.e. unisex premiums. Women go to the doctor approximately twice as often as men do. The imposition of unisex premiums will cause the premiums for males to be increased while the premiums for females will be reduced.

Another important aspect of the Affordable Care Act is Guaranteed Renewability. As long as you pay the premiums, the insurance company cannot cancel your policy. No matter how many claims you submit or how much your healthcare cost.

The insurance company can cancel your policy for the following reasons:

  • You commit fraud or material misrepresentation.
  • The insurance company stops issuing policies in your state.
  • You move outside the coverage area.

Open Enrollment Period (OEP)

The requirement to issue policies on a "guaranteed issue" basis creates problems related to "adverse selection." Adverse Selection is the concept that the only people who will buy an insurance policy are those who "know" they are going to file a claim very soon. If you could buy insurance "any time" you wanted with guaranteed issue, you would wait until you were checking into the hospital to purchase a policy with the lowest possible deductible. You would let the insurance company pay the hospital. After you were discharged from the hospital with a "clean bill of health", you would cancel the policy. You would be very happy to pay $400 in premiums in return for the insurance company paying your $200,000 hospital bill. Life would be great right up until the time every insurance company went out of business. Then no one would be able to buy insurance at any price.

To mitigate (not eliminate) adverse selection, the Affordable Care Act requires insurance companies to restrict enrollment to a an annual "Open Enroll Period." The ACA Open Enrollment Period begins November 1st and ends January15th. That is right—you will have only 76 days to buy insurance each year under the Affordable Care Act! Policies will go in-force January 1st if enrolled by December 15th and February 1st if enrolled after December 15th.

If you decide you want health insurance outside the ACA Open Enrollment Period, you will have to wait until next year unless you experience a Qualifying Life Event.

Qualifying Life Events

  • Moving to new area where different health plans are available
  • Certain changes in income,
    • Loss of a job
    • Subsidy/Cost Sharing eligibility changes due to income change
  • Changes in family size
  • Marriage or Divorce
  • Gaining status as a citizen, national, or lawfully present individual
  • Loss of Medicaid eligibility
  • Loss of employer-sponsored coverage

If you do experience one of the seven Qualifying Life Events listed above, that event triggers what is called a Special Enrollment Period (SEP). The Special Enrollment Period begins on the first day of the onset of the triggering event and last for thirty or sixty days. If you do not submit an application for health insurance during the SEP, you will have to wait until the next Open Enrollment Period.