Getting around Obamacare’s ‘open enrollment’ limits

I received an e-mail the other day from someone who is considering dropping their current coverage because of the increase in costs (he specifically used the term ‘robbery’ to describe their new premiums) and joining one of the health care sharing ministries instead. His question to me was, would they be considered uninsured for the purposes of going back to conventional health insurance if they ultimately decided the health care sharing ministry just wasn’t for them.

It’s a great question, and I thought I’d take a stab at shedding some light on it.

The short answer is, yes, someone who is a member of a health care sharing ministry is considered to be uninsured, although as I’ve pointed out they are exempted from having to pay the tax that Obamacare levies on the uninsured. This means that someone who decides to leave a ministry and purchase individual coverage either through an exchange or directly from an insurance company may have some difficulty doing so.

Why is this the case? Under Obamacare, there are annual ‘open enrollment’ periods during which anyone, regardless of their previous insurance status, is able to buy health coverage. Pretty much everybody who applies has to be given insurance at standard rates, with a few exceptions (smokers may have to pay a surcharge, for example).

The initial open enrollment period began in October of last year and will last through March 31st of this year. According to Healthcare.gov, the next open enrollment period will be from November 14, 2014 through January 15, 2015. 

Potentially this means that individuals who elect not to buy health insurance by March 31st won’t be able to buy health insurance again until mid-November. For most people, that’s probably not going to be a problem, especially if they utilize any of the alternative types of coverage that I regularly talk about hear including the ministries, critical illness or fixed benefit insurance, or short-term health insurance.

But some people will probably change their minds, or their circumstances will change, or they’ll simply decide they made a mistake in not getting coverage by the open enrollment deadline. And in many cases, they won’t want to wait until November to get coverage. So, are there any ways they can still get coverage?

The answer is yes. While most people will likely be signing up during the open enrollment period, there are a number of exceptions that allow people so sign up during what is called a ‘special enrollment period,’ which lasts for sixty days after a ‘qualifying life event.’

Qualifying life events include marriage, divorce, adoption of a baby, and moving to a new area that offers different insurance plans. Very roughly speaking, that looks to cover something like 10 to 15 million Americans each year who experience one of these qualifying life events. Most of them will likely already be covered, but since marrying and moving tend to be more frequent among the young, who are also less likely to have health insurance, there’s no doubt that a substantial number of people with qualifying life events will potentially be able to take advantage of a special enrollment period.

But what if you don’t get married, have a baby, move, or experience another qualifying life event? Are there other options for obtaining conventional health insurance, aside from getting a new job that offers coverage?

The answer is yes, of course.

The e-mail I mentioned earlier was from a small business owner (at least I assume so, since their last name was reflected in the name of the company they identified themselves with), and that reminded me of something I’ve been meaning to write about for a while but hadn’t yet gotten around to.

Under the law (not just Obamacare but also something passed in the mid-nineties known as the Health Insurance Portability and Accountability Act (HIPAA for short), small employers can obtain health insurance at any time. And while the law defines small employers as those with 2-50 employees, many states allow what are called ‘group-of-one’ coverage, where someone who is self-employed with no other employees is able to obtain small-group insurance.

Here’s how Parachute Health, which I wrote about a few weeks ago, describes this option:

You Don’t Have To Wait For Open Enrollment

An annual “open-enrollment” period of 3 months will be the time allowed by Obamacare to sign-up for a new health insurance policy.  Most of the country will have open-enrollment from October 1st to December 31st.  The first year it’s extended to 6 months (Oct. 1, 2013 to March 31, 2014). 

There are several “qualifying events” that will allow someone to enroll other times of the year, but they are generally for people who had coverage another way (like through an employer) and lost it.  If you are uninsured and need to purchase an individual health plan, the open enrollment period is when you can do it.

Potential Waiting Period

Since a person who doesn’t sign up for a health policy could get a cancer diagnosis the day after open-enrollment closes, they would potentially have to wait almost a year to sign-up for coverage. This fear of a potential waiting period is a deterrent the government is counting on to keep people from waiting to sign up until after they get sick.  Unfortunately, they seem to have forgotten about another law that allows you to sign-up any month of the year.

HIPAA – The Protection You Didn’t Know You Had

Since 1996, HIPAA, has been allowing small group health plans with 2 or more employees (or owners) to be started at any time. This plan cannot exclude any coverage or deny any applicants because of health issues.  In effect, a husband and wife who both got diagnosed with cancer could start a small group plan and be covered within a few days to a few weeks.  

Prior to Obamacare, the insurance carriers could charge more to sick applicants who started these 2 person groups but the new healthcare law doesn’t allow that.  So HIPAA is actually an even better loophole than it used to be.

Parachute doesn’t actually mention the group-of-one option, and it’s not available in every state. According to the Kaiser Family Foundation, the following states allow group-of-one coverage:

Colorado
Connecticut
Delaware
Florida
Hawaii
Maine
Massachusetts
Michigan
New Hampshire
North Carolina
Rhode Island
Washington

If you’re a small business owner with employees, setting up a small-group plan shouldn’t be any problem at all if, outside of the open enrollment period, you want to obtain conventional health insurance and don’t otherwise have a qualifying life event. If you don’t have employees and your state doesn’t permit group-of-one small group plans, you might want to think about bringing on an employee or perhaps splitting ownership with a spouse. Working with a reputable health benefits consultant or broker should help you to navigate any issues that may exist, allowing you to get health insurance outside of the open enrollment period.  

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6 Responses to Getting around Obamacare’s ‘open enrollment’ limits

  1. Jim Johnson says:

    here’s a wrinkle that applies to New Jersey.
    NJ formerly allowed for groups of two. I have done this for many years. starting in 2014 NJ no longer allows spouses to qualify as the two employees. So this led me to switch to Liberty Healthshare.

  2. HeatherP says:

    I think a common concern is whether someone would be considered uninsurable and have trouble getting insurance again. Thanks to Obamacare that really isn’t an issue anymore. Anyone who switches back to insurance after being on a plan with a healthcare sharing ministry can do so, either during open enrollment or during the timeframes/methods you mentioned above, but they would not be told they CAN’T signup. The person switching from an HCSM back to insurance is no different than the person who had nothing at all and wants to get insurance. Both were previously considered uninsured, insurance companies would see them the same way. Either way they are uninsured (member of HCSM or not) and cannot be prevented from buying insurance if the timing is right. The theory of “uninsurable” would be over now, in fact, it seems to me those people would be treated like royalty. They are exactly the customer Obamacare is trying to signup… someone who didn’t have insurance previously.
    Before obamacare anyone who was changing from an HCSM back to insurance would submit a letter from the HCSM explaining the nature of the membership and the “coverage” it offered, and that generally was enough to get back on an insurance plan. But now with obamacares rules that really isn’t necessary anymore.

  3. Dan Barnes says:

    Good stuff to know, Sean. My policy premium will increase by 35% in May and I had hoped to sign on with Liberty Healthshare. Problem is, they can’t produce evidence from the IRS that they are, in fact, exempt. This is a big consideration because my income would make the penalty substantial, would entirely offset the premium savings and then some. Have any of the ministries received written confirmation of exemption from the IRS? My gut tells me that the IRS is looking for ways to undermine the ministry provisions in the ACA…… I don’t want to be a test case. Dan Barnes

    • sean@impactpolicymanagement.com says:

      Dan: I don’t believe there is any word on Liberty HealthShare and whether they have received their exemption, my last conversation with them (about 2 weeks ago I think) was that they were still waiting to hear back.

      I think it’s a dead-certain lock that Samaritan, Christian Healthcare Ministries, and Christian Care Ministry (AKA Medishare) will qualify, Liberty thinks they’re a lock too but I’ve heard from knowledgeable people that they may have some problems with their application. I’m not an attorney and can’t claim to know what the IRS/HHS will ultimately rule, I’m just passing on the sense I have of where things stand based on conversations with people I trust.

      And no, you probably don’t want to be a test case! ;->

  4. Art Forrest says:

    The ACA (Obamacare) was written in such a way that there are only 3 HCSMs that qualify: Samaritan, Medi-Share, and CHM. Specifically:

    “To constitute as a health care sharing ministry — and therefore be exempt from the Affordable Care Act requirements — the nonprofit has to have been in existence since 1999.”

    Also, if someone were a member of one of these and elected to “drop out,” they would then be unable to enroll in an Obamacare-compliant plan until open enrollment (that is, dropping/canceling the plan is NOT a “qualifying event”), making them liable for the penalty/tax. This has nothing to do with being insurable or not – it simply doesn’t meet the specific definitions in the ACA regulations as a “qualifying event.”

    Finally, and for those people who don’t live in one of the “1-man group” states, most states (NJ being an exception, as Jim stated above) will allow a spouse to serve as the 2nd employee, thus making a “2-man” group, but most insurance companies will require some sort of proof that the 2nd employee (spouse or otherwise) is, in fact, an “employee” (typically by requesting the state wage/tax report and/or payroll records). Setting up your own small business is a viable way to get around the open enrollment problem, but it takes a bit of planning, time, and must be done properly.

    • sean@impactpolicymanagement.com says:

      I think it was certainly the expectation of those who wrote it that only 3 ministries would qualify, but there’s some considerable debate over whether that is in fact the case! The folks at Liberty HealthShare seem to think they qualify, and I’ve heard informed opinions both agreeing and disagreeing with that – we’ll see! The are potentially other ministries as well, small operations that were totally under the radar but that may qualify as well, time will tell what happens to them.

      And you are correct, someone dropping out of a ministry would need to wait until the next open enrollment period to buy an ACA-qualified plan. And yes, setting up a small business does take time and planning!

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