How Does Health Insurance Work After the Policyholder Dies?

Updated

After a life insurance policyholder dies, it’s a fairly straightforward process to file a claim and conclude business with the life insurance company. Unfortunately, it’s not that easy with health insurance. There is often a spouse and/or children covered by the policy that want to continue their coverage after the death of the policyholder.

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Health insurance is known to have many grey areas, which can generate questions such as: “Can spouses or dependents continue to use the health insurance after the policyholder dies?” and “How do you cancel health insurance for a deceased policyholder?”

This article addresses those questions and more. If you are the policyholder for a health insurance policy, we’ll address your family’s options concerning your health insurance and what happens when you die.

Is a Health Insurance Policy Valid After the Policyholder Dies?

According to hr360, a resource for Human Resource departments, the death of an employee covered by an employer’s group health insurance plan is a qualifying event under the Consolidated Omnibus Budget Reconciliation Act (COBRA). Consequently, the surviving spouse and dependents of a deceased employee may be eligible for COBRA continuing coverage for up to 36 months.

Under COBRA, the survivors are responsible for 100% of the monthly premium, meaning they’ll pay both the employee premium and the amount the employer contributed as an employee benefit. COBRA coverage is known to be extremely expensive, which leads many people to use the Affordable Care Act (explained below) as an alternative solution.

The surviving spouse must notify the decedent’s employer as soon as possible since the employer must notify its group health insurance company within 30 days after the date of death. The insurer does not have to extend coverage to the spouse and dependents if the employer does not provide notice.

The process works differently if the policyholder and dependents were covered by an individual health insurance plan, not an employer’s group insurance plan. The spouse and dependents can use the Affordable Care Act (ACA) to get “Marketplace” health insurance because the policyholder’s death is considered a Qualifying Life Event (QLE). 

QLEs trigger a Special Enrollment Period (SEP), which allows surviving family members to enroll at a time outside of the Open Enrollment period, which comes around once per year. SEPs open a 60-day window for survivors to sign up for an ACA-compliant Marketplace plan. If you don’t act during the 60-day SEP, you’ll have to wait until the annual Open Enrollment period to select your new plan.

Another option the surviving spouse and dependents have available to them is to apply for a private individual/family health insurance program through an insurance company. These programs are not usually as expensive as COBRA or Marketplace insurance but they aren’t inexpensive, either.

In addition to cost, individual health insurance plans have another drawback: the survivors need to complete an application for coverage that includes many questions about the health history of the applicants. The insurance company can decline anyone with pre-existing medical conditions.


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Can Spouses, Parents, or Dependents Continue to Use the Health Insurance Policy After the Policyholder Dies?

Anyone covered by the health insurance policy will continue to be covered and can use the policy until the next premium is due.

For example, John was insured through his group health plan at work, and the policy also covered his spouse Mary and their three children. Through payroll deduction, John’s premiums were paid through June 30th. Unfortunately, John passed away on June 14th. Since premiums had been paid through the end of the month, any covered claims submitted by Mary or the children would have to be paid by the insurance company.

Neither group health, individual, or Marketplace plans allow parents to be covered under a child’s policy, so there would be no change to John’s parents’ health insurance status due to John’s death. 

If John owned a life insurance policy that named his parents as beneficiaries, his death would trigger a payout by the life insurance company to help them financially if they were responsible for funeral costs.

How Do Claims and Refunds Work After the Policyholder Dies?

There has been more than one lawsuit filed by families that claimed the insurance company should cover the deceased policyholder’s medical bills if that claim originated while the policyholder was alive. And, the families usually prevail in cases like this. 

For example, Richard’s health insurance premiums were paid through August 31st. On August 28th, he suffered a fatal heart attack. Many of his medical bills arrived in the mail after September 1st. The health insurer denied payment on some of the claims filed by Richard’s family after August 31st (the last day of Richard’s health insurance coverage) on the grounds that Richard was no longer insured by the insurer when the claims were submitted.

Richard’s family appealed to the state insurance commissioner’s office for help, who, upon investigating the situation, declared that the health insurance company should pay the claim based on the fact that Richard was covered when healthcare providers provided care for him.


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How Do You Cancel Health Insurance For a Deceased Policyholder?

According to HealthCareInsider.com, which is owned and operated by HealthCare.com, a privately owned company whose “mission is to help consumers make better healthcare decisions,” you can cancel a Marketplace health insurance plan by following these steps:

  • To cancel a Marketplace Health Insurance Plan: If you’re the primary policyholder and someone on your plan dies, you can cancel health insurance for the deceased enrollee online at healthcare.gov. You can also contact the Marketplace Call Center at 1-800-318-2596 (TTY: 1-855-889-4325) to report the date of the person’s death.

You can report a death on behalf of a household, even If you are not a member of the household listed on the Marketplace application, so long as you’re at least 18 years old. Here’s what you’ll need to do:

  1. Submit copies of documents verifying the death, such as the death certificate, obituary, court document providing proof of death, or proof that you’ve been named executor of the estate.
  2. These documents should include the deceased person’s full name, date of birth, SSN (if known), and your contact information as the person submitting the documentation.
  3. Mail copies of all documents to Health Insurance Marketplace / ATTN: Coverage Removal, Dept. of Health and Human Services, 465 Industrial Blvd., London, KY 40750-0001. Note that you should keep the originals as backup and only send copies. 
  4. Marketplace call center will contact you: The Marketplace Call Center will try to contact you about ending coverage for the deceased and inquire about anyone else's status still on the plan. For example, the remaining household members may need to update their tax filings, financial, or other information on their application. A death in a household usually qualifies the other members for a SEP, allowing them to change plans. 

Canceling private health insurance is a bit less complicated than canceling Marketplace coverage. 

Your first step is to contact the policyholder service department at the insurance company (it’s best to call them and get the name of the person you spoke with). They’ll walk you through all of the documents they’ll need to cancel coverage, which usually includes a cancellation request form and documents verifying the policyholder's death, such as a death certificate or obituary.

After you’ve submitted the necessary paperwork, you’ll receive written confirmation from the insurance company. Be sure to save all correspondence in case a dispute arises concerning dates of coverage and claims payment.

Buying Health Insurance For Yourself After the Policyholder Dies

It’s not possible to advise you in the space of this article about how to buy health insurance for yourself after the policyholder dies, but we can get you started in the right direction. 

A good starting point in your search is to know the type of health plan you want, of which there are three to choose from: 

  • An indemnity or Fee-For-Service plan
  • An HMO (Health Maintenance Organization)
  • A PPO (Preferred Provider Organization)

Let’s take a brief look at each:

Indemnity plans, also known as fee-for-service plans, allow you to go to any doctor, specialist, or hospital you want to without the need for a referral or the provider needing to be part of an approved network. With these plans, you’ll pay a deductible, and the insurer will then pay a set percentage of the balance of the charges.

HMO plans have a network of doctors and hospitals that charge you a fixed price for any treatment or procedures. For example, if you break your arm, you’ll know upfront that your portion will be $150 regardless of the amount of the entire bill. Sounds good, but there is a catch – you must receive treatment from providers in the network, or your claim can be denied. Most plans will allow you to use a provider who is not in your network if it’s an emergency.

PPO plans are much like an HMO, but they allow you to be treated by providers who are not in your network. You’ll pay more, and the insurance company will pay less, but you’ll have more choices of providers than an HMO. If flexibility and choice are important, a PPO may be a good option for you.

If you’ve narrowed your choices down to either an HMO or PPO, check and see if your family doctor is in the network for either plan. You may prefer a plan in which he’s a network member if it means you’ll pay less for an office visit than with other plans.

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A Final Word

There are many details to be attended to when a loved one passes away. The first type of insurance people will talk about is life insurance, but be careful not to forget to attend to the health insurance. Not having the right coverage can be very costly in the long run.

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