Deciding to cancel your health insurance is a significant financial step. Whether you’ve found a better plan through a new job, are eligible for Medicare, or can no longer afford your premiums, understanding the rules around cancellation is crucial. While you generally have the right to cancel your policy, the timing and process depend heavily on the type of insurance you have.
This guide will walk you through the specifics of canceling different health insurance plans, from Affordable Care Act (ACA) Marketplace coverage to employer-sponsored plans and Medicare. We’ll cover the potential penalties, the exact steps to take, and what to consider before you make a change. Knowing these details can help you avoid unexpected coverage gaps and financial setbacks.
When can I cancel my health insurance?
The ability to cancel your health insurance depends on the type of plan. While some plans offer flexibility, others have strict rules tied to specific enrollment periods.
Generally, you can change or cancel your coverage during the annual Open Enrollment Period (OEP). For most plans, this is the designated time each year when anyone can make changes to their health insurance.
You may also qualify for a Special Enrollment Period (SEP), which allows you to change your plan outside of the OEP due to a qualifying life event. According to HealthCare.gov, these events include:
- Getting married or divorced
- Having a baby or adopting a child
- Losing other health coverage (e.g., due to job loss)
- Moving to a new ZIP code
- A change in your household income that affects your eligibility for subsidies
- An employer offering to help pay for your health care
Let’s look at the specific rules for different types of insurance.
Affordable Care Act (ACA) Marketplace Plans
If you have a plan through the Health Insurance Marketplace (also known as Obamacare), you can cancel it at any time. You can choose to end coverage for your entire household or just for specific individuals on the plan. You can even set a future date for the cancellation to align with the start of a new plan, which helps prevent a gap in coverage.
However, be aware of state-specific notice periods. For example, California requires a 14-day notice before your cancellation takes effect.
Employer-Sponsored Health Plans
Canceling a health plan from your job has a few more restrictions. The rules depend on how you pay your premiums.
- If you pay premiums with pre-tax dollars: This is common in what’s called a Section 125 or “cafeteria” plan. By law, you can only cancel your coverage during your company’s open enrollment period or if you have a qualifying life event that triggers a Special Enrollment Period.
- If you pay premiums with post-tax dollars: If your premiums are not deducted on a pre-tax basis, you can cancel your plan at any time.
If you are unsure how you pay your premiums, contact your company’s human resources (HR) department. They can provide guidance on the cancellation process and any necessary forms.
Medicare
Canceling Medicare depends on which parts of the program you have.
- Original Medicare (Part A and Part B): You can drop Original Medicare anytime. To cancel Part B (and Part A, if you pay premiums for it), you must submit a signed, written request to the Social Security Administration or follow the instructions in your Medicare welcome packet. Your coverage will end on the last day of the month after your request is submitted. You will be responsible for premiums until that date.
- Medicare Advantage (Part C) and Prescription Drug Plans (Part D): These plans have stricter rules. You can only drop your Part C or Part D plan during specific times:
- Medicare Open Enrollment Period (October 15 to December 7)
- Medicare Advantage Open Enrollment Period (January 1 to March 31)
- A Special Enrollment Period (if you qualify due to a life event)
Medicaid and CHIP
Medicaid and the Children’s Health Insurance Program (CHIP) are state-run, so cancellation rules vary. You will need to contact your state’s Medicaid agency to understand the specific process.
If your income increases and you no longer qualify, you will be notified. This loss of coverage triggers a 60-day Special Enrollment Period, allowing you to buy a Marketplace plan. If you become eligible for other insurance (like a new job-based plan), you should notify your caseworker. In many cases, if you receive Medicaid for free, you might not need to formally cancel it, as it can sometimes work as secondary coverage to another plan.
The risks of canceling your health insurance
Canceling your health insurance without having a new plan in place is risky. If you have a medical emergency, you will be responsible for 100% of the costs, which can quickly lead to significant debt.
Additionally, if you cancel outside of an open or special enrollment period, you may not be able to get a new comprehensive plan right away. Some private insurance companies offer short-term plans outside of open enrollment, but these typically do not meet the ACA’s minimum essential coverage standards and may not cover pre-existing conditions.
Penalties for being uninsured
While there is no longer a federal tax penalty for not having health insurance, some states have their own individual mandates. If you live in one of these states and go without coverage, you could face a penalty on your state tax return.
As of 2024, the following states and districts have individual mandates:
- California: The penalty is the higher of 2.5% of your gross income above the filing threshold or a flat fee per person ($900 per adult and $450 per child in 2024).
- District of Columbia: The penalty is the higher of 2.5% of household income or a flat fee ($695 per adult, $347.50 per child).
- Massachusetts: The penalty amount varies based on your income relative to the federal poverty level.
- New Jersey: The penalty is based on factors like household income and family size, with a maximum based on the average cost of a Bronze-level plan in the state.
- Rhode Island: The penalty is the higher of 2.5% of your household income or a flat fee ($695 per adult, $347.50 per child).
These penalties are designed to encourage residents to maintain health coverage and avoid the financial strain that uninsured medical costs can place on the healthcare system.
How to cancel your health insurance policy
The steps to cancel your health insurance policy are different for each type of plan. It’s important to follow the correct procedure to ensure your coverage is terminated properly and you don’t continue to be billed.
How to cancel a Marketplace (Obamacare) plan
- Online: Log in to your account on HealthCare.gov or your state’s marketplace website. Navigate to your current plan and look for an option to end or terminate coverage. You will be able to select the date you want your coverage to end.
- By Phone: Call the Marketplace call center at 1-800-318-2596. A representative can help you cancel your plan. This is a good option if you are also transitioning to another government program like Medicaid or CHIP.
Remember to cancel as soon as you know your new plan’s start date to avoid paying for two plans at once.
How to cancel a plan bought directly from an insurer
If you purchased your plan from an insurance company outside of the Marketplace, you will need to contact the insurer directly. Call the customer service number on your insurance card or visit their website. They will provide you with the specific steps, which may include filling out a form or submitting a written request.
How to cancel an employer-sponsored health plan
To cancel your work-based health insurance, contact your HR department. They will guide you through the process, which usually involves completing internal paperwork. Make sure the cancellation date of your old plan aligns with the start date of your new coverage to prevent any gaps.
Your next steps after cancellation
If you’re canceling one health plan, it’s likely because you’re moving to another. Whether it’s a new job-sponsored plan, Medicare, or a different Marketplace option, coordinating the transition is key.
Always confirm the start date of your new policy before setting the end date for your old one. Once your new coverage is active, you should receive a new insurance card and policy documents. Review them carefully to understand your new benefits, copayments, and deductibles.
If you’re left without coverage for any reason, explore your options immediately. You might qualify for a short-term health plan to bridge the gap or be eligible for a Special Enrollment Period. Taking proactive steps ensures you and your family remain protected against unexpected medical costs.
Frequently Asked Questions
Can I get a refund if I cancel my health insurance?
You might be able to get a refund if you cancel during a “free look period,” which is a short window of time (often 10-30 days) after you first purchase a policy. Outside of this period, refunds for premiums already paid are unlikely, but you should confirm with your specific provider.
Can I transfer my health insurance to another company?
Health insurance policies are not directly transferable between companies. If you want to switch insurers, you must cancel your current policy and enroll in a new one. This is typically done during an open or special enrollment period.
Can a health insurance company refuse to cover me?
Under the ACA, insurance companies cannot deny you coverage or charge you more because of a pre-existing condition. This protection applies to all ACA-compliant plans.
What is COBRA?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that allows employees and their families to continue their group health coverage for a limited time after a job loss, reduction in hours, or other qualifying events. While COBRA ensures continuity of coverage, you will be responsible for paying the full premium plus a small administrative fee, which can be expensive.
