What happens if you have a gap in health insurance coverage?

Not having health insurance can cause the uninsured a great deal of stress. Never knowing if you will be able to afford medical care when you may need it most can understandably be very worrisome. However, individuals with health insurance report experiencing significantly lower average stress levels than their uninsured counterparts (American Psychological Association).

Small and medium-sized businesses (SMBs) can play a key role in seriously (and heroically) helping their staff in the early days of their business by providing healthcare options, especially for those who may be experiencing a gap in their coverage.

So—what happens if you have a gap in health insurance coverage? Read on to find out what struggles your employees may be experiencing regarding healthcare coverage and how you can help.

What happens if you have a gap in health insurance coverage?

Let’s take a look at some of the challenges your employees face when they have a gap in health insurance coverage—from taking major financial hits to losing access to medical care that can greatly affect their health.

They foot the bill

When someone doesn’t have health insurance, they become financially responsible for the full cost of any medical care received while being uninsured. Even routine doctor visits can become expensive, but the financial impact is much greater if they experience a medical emergency, such as an accident or sudden illness. Without having a good health insurance plan to offset costs, individuals can face substantial out-of-pocket expenses for hospital stays, surgeries, emergency room visits, or diagnostic tests. For example, an emergency room visit alone can cost thousands of dollars, and an extended hospital stay can quickly escalate into tens of thousands.

In addition to the immediate financial burden, a lack of insurance can result in individuals delaying seeking necessary care, exacerbating health issues and potentially resulting in more costly treatments later. Without preventative care, minor health issues may escalate into serious, more expensive conditions.

The financial problems associated with being uninsured can escalate quickly. Medical debt can accumulate fast and may lead to severe financial consequences, including the depletion of savings, damaged credit, or even bankruptcy.

They may experience interruptions in treatment

While some young and healthy adults may be able to go months, if not years, without experiencing any major health issues by being uninsured, some individuals can struggle immensely when they lose coverage. A loss of healthcare coverage can lead to interruptions in ongoing treatments, which can be extremely damaging for individuals with chronic issues.

Not having access to the medical professionals, treatments, and prescriptions they need at reasonable prices can lead to long-term negative health effects.

Their future policies may be affected

Gaps in health insurance coverage can influence one's eligibility for future insurance policies as insurance companies may consider an individual's recent insurance history when determining coverage options and premiums.

Individuals with prolonged periods without coverage may be viewed as higher-risk applicants, potentially facing higher premiums or more limited coverage options when they try to re-enroll. Certain insurers might also impose waiting periods or exclude coverage for preexisting conditions if continuous coverage has been broken. Maintaining consistent health insurance, even through options like COBRA or Marketplace plans, can help Americans avoid these challenges and secure more favorable terms when transitioning between policies.

They can run into fees and tax penalties

The Affordable Care Act (ACA) legally requires individuals to maintain minimum essential coverage to avoid tax penalties—as long as they can afford it. Unless they qualify for an exemption due to finances, if someone fails to buy health insurance coverage (a necessity if they don’t have access to a workplace plan or a spouse’s plan), they may have to pay a fee in the form of a tax penalty (State of California Franchise Tax Board).

Individuals can also claim an exemption from the health coverage requirement if they were uninsured for less than three consecutive months, known as a "short gap" in coverage. If uninsured for three months or more consecutively, the exemption does not apply, and future gaps would require a new exemption request (CMS.gov).

What to do if you lose job-based coverage

One common reason some individuals wind up uninsured is experiencing a gap in health insurance between jobs. There are a few options that uninsured individuals have for securing coverage—even if it is temporary until they find a new job and qualify for an employer-sponsored plan.

• Enroll in a Marketplace plan through a Special Enrollment Period. While normally, you can only enroll in a new healthcare plan during the open enrollment period, job loss can qualify you to apply any time of the year. If you qualify for a Special Enrollment Period, you can apply for a new healthcare plan up to 60 days after you lose your coverage. Marketplace plans may offer savings through premium tax credits, and you can also explore eligibility for Medicaid or CHIP.

• Buy COBRA coverage. If you lose your job, this type of plan allows you to keep your job-based plan for up to 18 months, though you’ll need to pay the full premium plus a small administrative fee. If you choose COBRA, you can still switch to a Marketplace plan later if desired (Healthcare.gov).

So—how can you as a small business owner or benefits administrator help ensure your employees always have access to health insurance coverage? You can work with Thatch to ensure your employees are well taken care of at a price that works for your budget. Book a free demo today with Thatch to see how we can assist you in reaching your benefits goals.

Thatch can help you make important decisions regarding what type of healthcare plan is right for your employees (such as fully insured vs. self-insured plans), talk through deductible and premium options, and make it easier to support your employees in never losing healthcare coverage. That can also help you navigate tricky issues like determining which employees are exempt or non-exempt and who you legally have to offer health insurance coverage to.