Late Premium Payment

One of the adverse effects of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) is that insurance carriers have taken a hard line against purchasers paying premiums late. Each month, a group insurance purchaser is given a 31 days grace period in which to pay its insurance premiums. If a group purchaser pays its premium date after the 31 days grace period has expired, a carrier will normally reinstate the coverage.

HIPAA allows health carriers to terminate a group health insurers coverage, if the group purchase has had to have its coverage reinstated more than twice in any given 12 month period (not calendar or contract year). If a group purchaser pays late 3 times in any 12 month period, its employees will be terminated from coverage at its last paid through date, which is normally 1 month prior to being notified that its coverage has been terminated.

For example, if a group is paid through 7/31/XX and fails to pay its 8/1/XX premium in time, notification of coverage termination will be sent on 9/5/XX (assuming this is the third instance of late payment within a 12 month period). The next earliest effective date for coverage with any carrier is then 10/1/XX, thus leaving a group purchaser’s employees without coverage for 2 months. This means that employees may be receiving services and incurring claims during a time for which they do not have coverage.

The reality of this is that if a group purchaser is requiring an employee to contribute to a health plan or an employer has an employment contract that mandates health coverage be provided to its employees, an employer in the above situation, may be responsible for payment of claims incurred while there was no coverage in force.