Payment Due: The Obamacare Deadline No One Is Talking About

by Charles Ornstein, ProPublica, Dec. 11, 2013

The U.S. Department of Health and Human Services announced this morning that nearly 365,000 Americans had signed up for private health insurance under Obamacare. The vast majority came from 14 states running their own insurance exchanges, while 137,000 came by way of HealthCare.gov, the much-faulted federal Web site that handles enrollment for the remaining states.

But amid the rush to enroll as many people as possible by the Dec. 23 deadline, there's a huge caveat that isn't getting much public attention: For coverage to take effect on Jan. 1, enrollees must pay their first month's premium on time. (The deadline varies somewhat by state and by insurer.)

That's slow going, according to consultants and some insurers, raising the prospect that actual enrollment will be far lower than the figures HHS is releasing.

"There is also a lot of worrying going on over people making payments," industry consultant Robert Laszewski wrote in an email. "One client reports only 15% have paid so far. It is still too early to know for sure what this means, but we should expect some enrollment slippage come the payment due date."

Another consultant Kip Piper, agreed. "So far I'm hearing from health plans that around 5% and 10% of consumers who have made it through the data transfer gauntlet have paid first month's premium and therefore truly enrolled," he wrote me.

"It naturally varies by insurer and will hopefully increase as we get close to end of December and documents flow in the mail," added Piper, a former official at the Centers for Medicare and Medicaid Services. "But overall I'm hearing it's a small portion so far.  And that, of course, is a fraction of an already comparatively small number of people who have made it through setting up an account, getting verified, subsidy eligibility determined, plan selected, complete and correct data transferred to the insurer, and insurer set out the confirmation with invoice for consumer's share of the first month's premium."

Blue Shield of California said it has sent out thousands of payment request letters.

"Members do not know they need to make their first month's payment until they get this letter. Payments are trickling in and while we expect an uptick over the next week, members have until January 6 to make this payment," spokeswoman Mia Campitelli wrote in an email.

California's deadline is later than most, and consumers need to check for the deadline for the insurance plan they choose. Campitelli said Blue Shield does not have a projection of what percentage of enrollees will pay up by the deadline.

With problems plaguing HealthCare.gov until the end of November, consumers don't have much time to pick plans. Some consumers, on the advice of federal officials, have turned in paper applications 2014 and those are still being processed. That leaves little time to send invoices and process the first month's payment.

Ken Wood, a senior adviser to Covered California, the state's exchange, said it is "too early to tell" what would happen. "Remember that we have 11 different plans with 11 different billing systems 2014 some more flexible than others," he wrote in an email. "Excluding only Christmas Day and New Year's Day, there are only eight business days between the December 23rd cutoff for enrollment and the January 6th deadline for payment."

Wood said the consequences of missing the first payment differs by person.

"The good news for this first open enrollment is that missing a payment deadline just rolls your effective date a month," he wrote. "This is OK for the uninsured but a potential concern for the insured who are rolling over into a compliant plan since they will now have a gap in coverage."

Covered California is promoting "give the gift of health" where a grandparent or parent would pay for the coverage with a debit or credit card.  Some enrollees who receive subsidies still have to pay $1 a month for their coverage, "oddly a real billing and collection concern because it is easy to overlook," Wood said, 2014 so Covered California is encouraging them to pay $12 for the year and be finished. "The barriers to paying the entire amount are the systems capability of the health insurers," Wood said.

New York's State of Health exchange does not have data on how many enrollees have paid premiums, spokesman James O'Hare said. "In the event that an enrollee does not pay his/her premium, coverage does not go into effect, and they will no longer be enrolled in NY State of Health," he wrote in an email. 

James Stover, CEO of University of Arizona Health Plans, said he expects more than 85 percent of enrollees to pay the premium on time. "Right now we're comfortable with the process we have in place," he said. "As soon as we get the information in, we're reaching out to the individuals to let them know what their binder payment is. We'll follow up with them."

Stover said that enrollment has been lower than expected. A couple of weeks ago, only one person had signed up. By early this week, the figure had increased to 35. "We plan to have triple digits in the next couple weeks and greater growth in the next couple months. We initially expected to have somewhere between 5,000 to 6,000 by June 30, 2014."

While saying it is difficult to guess what will happen, Piper said he believes "a plan will be lucky if half of applicants pay first month's premium on time for January coverage start but that perhaps three-quarters will pay in time for coverage start by February or March."

One additional point to keep an eye on: If consumers pay their first month's premium but then stop paying, insurers cannot drop them from their plans for 90 days.

"Under the rule interpreting the law, insurers offering plans on the exchanges must provide a three-month grace period to individuals who have enrolled and who have stopped paying their premiums. In the first 30 days, the insurer must continue to pay incurred claims. But for subscribers who ultimately fail to pay premiums within the 90 days and whose coverage is terminated, payers are not required to pay for claims incurred during the last 60 days of the 90-day period," Modern Healthcare reported in August.

Healthcare providers are nervous that they will be on the hook for services delivered to patients who haven't paid their premiums.

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Editor's Note: This post is adapted from Ornstein's "Healthy buzz" blog. Have you tried signing up for health care coverage through the new exchanges? Help us cover the Affordable Care Act by sharing your insurance story.