Not Paying for Health Insurance

by Site Author

I spend a lot of time thinking about health policy. So I was especially concerned when a friend told me that her insurer had dropped her. She had found the plan through a state’s Health Insurance Exchange. That is, she was covered by “Obamacare.” So how could she have been dropped?

As it turns out, the only way that the Affordable Care Act allows exchange-based insurers to drop customers is if the customers don’t pay their premiums. My friend, sadly, fell into this category. She didn’t pay her premium for three months.

Now, you can’t blame companies for cutting off customers who don’t pay. After all, your cable company will cut off your cable if you don’t pay your bills.

That said, there are some ways in which health insurance is different. First, you need health insurance most when it is hardest to pay for it. My friend had hit her head and gotten a concussion. As a result, she suddenly found herself facing a variety of unexpected medical bills. Because she was insured, she only faced $10 or $20 co-payments. But those co-payments started to add up when her migraines persisted and she visited specialist after specialist.

When she realized that she couldn’t pay her bills on time, she called up her insurer, and explained the situation. Now, at this point, her insurer should have explained to her that she was in danger of losing coverage. Her insurer could have informed her of the 90-day grace period mandated by the exchange. But the insurer did no such thing.

And the reason for that is a second difference between health insurance and cable companies. Once a customer has piles of medical bills, the insurer has every incentive to drop them. Insurers make money on healthy people who rarely need medical care and lose money on sick people. My friend—through no fault of her own—had demonstrated that she was in the latter category and thus a liability for the insurer.

It is important to remember that this is only the Health Insurance Exchange’s first year. One hopes that some of these issues will be resolved as regulators become accustomed to running an exchange. In the future, it ought to be more difficult for insurers to drop customers. Customers ought to receive several warnings before they lose coverage.

But regulators will have to grapple with the fundamental problem of “non-payment.” Some consumers are just going to end up losing coverage. And that reality is simply an unavoidable and unpleasant aspect of a system that mandates everyone buy coverage, and penalizes those who do not.