Termination of Health Insurance

A provider cannot typically cancel health insurance that you carry through your employer or as an individual policy unless you fail to pay premiums on the policy, or you are found to have committed fraud in connection with your insurance application. Most states provide this protection for your benefit so that you won't lose your health insurance coverage when you need it most.

Significance

• A guaranteed renewable health insurance policy cannot be canceled just because you make expensive insurance claims. Health insurance premiums that are paid on time will not be returned to you, and you will have the option to renew your health insurance policy every year. This will prevent you from having a lapse in coverage if you need the insurance for ongoing medical treatment. But, it also protects your ability to receive future care if you need it.

Benefit

• The only way you can lose your health insurance coverage is if you stop paying your premiums. If you stop paying your premiums, you may still be eligible for a state assistance program (depending on your state) to help you get the insurance you need. Finally, if your coverage is terminated and you can't afford health insurance, you may qualify for Medicaid. Medicaid will provide health insurance to you based on need. You won't have to worry about losing your insurance unless your income increases beyond the threshold necessary to qualify for Medicaid.

Disadvantage

• The disadvantage of guaranteed renewability in health insurance is that your premiums may go up every year. Even though you have the option to renew each year, this does not prevent health insurance companies from charging higher premiums. Health insurers must cover healthy individuals as well as individuals who frequently use their health insurance policy. Because of this, insurance premiums may increase if the insurer experiences an increase in claims throughout the previous year.

Consideration

• When looking for a health insurance plan, affordability and coverage are of paramount importance. All group health plans will have the same price for the group you belong to, and your employer decides which plan will be available. For individual plans, try to find a plan that fits your financial goals. If you anticipate using your health insurance a lot, for example, then a co-pay plan may be best for you. If you don't anticipate using coverage much, a high-deductible plan may be ideal.