There are several potential reasons why you may want to cancel your major medical insurance policy.
If you’ve recently turned 65 and are now Medicare-eligible you’ll want to cancel your individual major medical policy and transition to Medicare.
Or perhaps you recently got a job with employer-sponsored benefits and need to cancel your ACA or private health insurance policy.
You may be weighing the risks and benefits of keeping your major medical insurance considering that beginning January 1, 2019, the tax penalty for major medical health insurance is repealed, effectively undoing the ACA individual mandate (the ACA, or “Affordable Care Act” is also known as Obamacare).
Is it a good idea to cancel your health insurance?
What are your options for more affordable major medical coverage and for alternative health insurance?
We’ll explore those questions throughout the rest of this post and explain how to cancel your health insurance.
You can cancel your health insurance but should you?
Before cancelling your major medical policy or simply not renewing during this year’s open enrollment period, it’s important to carefully consider the potential financial and health consequences of opting out of comprehensive major medical coverage.
Remember, major medical is the only type of insurance that includes the 10 essential health benefits, with coverage for preventive care, prescription drugs, and pre-existing conditions.
Learn more about what individual major medical insurance is and if it’s right for you.
Even though there are alternative health insurance options available like short-term medical with lower cost premiums, these plans have less coverage and far fewer consumer protections than ACA-qualifying major medical insurance mentioned above.
If you’re having trouble with high premiums or deductibles don’t abandon major medical before exploring some options that may help lower your out-of-pocket costs while keeping your comprehensive insurance plan:
- Use the Obamacare Calculator to make sure you don’t actually qualify for a subsidy! Just because you didn’t qualify last year doesn’t mean you couldn’t qualify this year. A subsidized ACA plan means lower monthly premiums.
- Whether you qualify for a subsidy or not, you can pair medical gap insurance with your high deductible health plan to get help paying your deductible should you need to use your health insurance.
Cancelling your health insurance policy
In most instances you can cancel your major medical insurance at any time without facing additional charges or fees.
How to cancel your Obamacare insurance policy
If you have a plan through the federal public marketplace, HealthCare.gov, or through your state’s public marketplace, below are the steps to take to cancel it.
You can cancel your Obamacare insurance either from your online account or by speaking to a marketplace representative on the phone.
In most cases, you can cancel your ACA insurance coverage for the same day and immediately stop accruing premium costs.1 Alternatively, you can set a future date to end coverage in order to avoid a gap in coverage if, for instance, you have upcoming employer-provided coverage.2
To cancel online:
- Login to your account from your state marketplace or from the federal marketplace, HealthCare.gov. Steps for each individual state will vary. Follow these steps for the federal exchange:
- Select start a new application or update an existing one > My applications + coverage.
- Under Your existing applications select your application, then select My Plans + Programs and click the red button: End (Terminate) All Coverage.
- Select the date you want to end your coverage. Check the attestation box, then click the red Terminate Coverage button.
If the cancellation was successful, a red “Terminated” or “Cancelled” message will display above your plan.
To cancel by phone:
For the federal marketplace, contact HealthCare.gov at 1-800-318-2596 (24 hours a day, 7 days a week) to speak to a representative.
If your state administers their own state exchange, navigate to the state marketplace website and locate contact information. If you’re not sure where to access your state’s marketplace website, you can find your state in the where to shop for health insurance by state list.
When you make contact, make sure to record the service representative’s name, the date/time, and any ticket or confirmation numbers you’re provided in the event you need to follow-up on the cancellation or require additional help with your case.
Review your bill:
Whether you cancel by phone or online, check your bank or credit card statement to make sure you’re not billed for coverage after your cancellation date.
You may end up owing money if you’re receiving a premium tax credit
If you’ve been receiving a tax credit to help offset the costs of your monthly premium, be aware that you may have to pay back part or all of it if your annual income ends up being more than what you projected when you initially qualified for the subsidy.
This could happen if you get a new job and the amount will be reflected on your annual tax return.
Learn more about what to do if your income changes while you’re receiving a subsidy.
How to cancel your private health insurance policy
If you worked with a personal insurance agent to enroll in a plan, contact that individual to begin the cancellation process.
If you purchased a private individual major medical policy directly from an insurance company (not through a public marketplace or agent), these are the steps to take to cancel it:
- Locate the contact information for your insurance provider. There is usually a customer service phone number printed on your insurance card and on your statements. Different companies have different policies and procedures around cancellation that may include:
- A waiting period before your effective cancellation date during which time you’ll have coverage and have to continue paying premiums. Two weeks is a common duration.
- Providing written notice (with your signature) either mailed or faxed to your insurance company in order to have your cancellation processed.
- Eligibility for a prorated reimbursement for any pre-paid premiums after the cancellation date.
- When you speak with the insurance company representative, make sure to record the individual’s name, the date/time, and any ticket or confirmation numbers you’re provided in the event you need to follow-up on the cancellation or require additional help with your case.
- If your last billing amount will be different from your normal bill, for example if you’ll have two weeks of coverage for your final billing period instead of four weeks, make sure to validate what that amount should be.
Review your bill:
Check your bank or credit card statement to make sure your final payment matches the amount you were quoted when you cancelled.
If you cancel but then change your mind can you reinstate?
There may be a grace period after cancellation during which you can be reinstated and resume coverage un-interrupted (check your policy as they vary).
You will be expected to pay your premium amount in full for that period of time during which your coverage was cancelled and it may take a couple of weeks for the policy to be reinstated, but you will have retroactive coverage for that time and you won’t have to undergo a new waiting period.
Can you get a full health insurance refund if you cancel?
In most cases a full refund is unlikely, especially after your first month of coverage, but individual health insurance companies will have different policies and individual states have different regulations.
For example, California requires a 10-day “free look” period during which you can cancel your policy for a full refund within 10 days of receiving your plan information in the mail (and assuming you haven’t made any claims).3 Florida has the same regulation.4
Make sure to check with your insurance company prior to enrolling in their plan.
Major medical alternatives
If you’ve cancelled your major medical policy but still want some level of coverage in the event of a catastrophic illness, injury or hospitalization you have some options ranging from less coverage and benefits to more:
Short-term health insurance
Depending on your state, you may be able to get a short-term medical policy for anywhere from 30 to 364 days.
These temporary health plans are not ACA-qualifying major medical insurance. They cover things like hospital room and board, emergency room and ambulatory services but not services like preventive care or pre-existing conditions.
You can enroll in these plans anytime (they’re not subject to the open enrollment period) and there are different levels of coverage and benefits to choose from to fit almost any budget.
Fusion Bundle: Fusion + Fusion STM
The Fusion Bundle pairs a hospital, surgical and critical illness health insurance plan with a short-term health insurance plan. Pairing two plans into one solution results in more convenience and coverage for medical expenses ranging from minor to catastrophic.
Summary + next steps
It may be tempting to opt out of major medical insurance to try to save some money.
Unfortunately, if you get sick or injured and have to pay all of your medical costs out of pocket, you’ll quickly lose out on any of those savings.
If you don’t feel like you need the higher level of coverage that major medical provides, and just want something in case of an unexpected illness or accident then a plan like short-term medical may be a good fit for you (short-term medical policies don’t include coverage for pre-existing conditions).
If you’re not ready to get a short-term medical quote yet, speak with an insurance professional that can help you assess your needs and find the right level of coverage.