The Affordable Care Act (ACA), often called Marketplace coverage, provides health insurance options for individuals and families who do not receive coverage through an employer or a government program. Circumstances frequently change, leading many enrollees to terminate their coverage before the plan year ends. Canceling this insurance requires careful attention to specific procedures and timing to prevent unintended gaps in coverage or unexpected tax consequences. This guide provides the steps for users enrolled through HealthCare.gov or a State-based Marketplace to effectively terminate their policy.
Determining the Effective Date of Cancellation
The date your ACA coverage officially ends is not automatically set and depends heavily on your reason for termination. If you are voluntarily ending your plan without immediately replacing it, your coverage will generally end on the last day of the month after you report the change. For example, if you report the change on June 15, your coverage will end on July 31, and you are responsible for the July premium payment.
A different timeline applies if you are gaining new health coverage, such as an employer-sponsored plan. In this situation, you can often set your termination date for the day before your new coverage begins, which prevents a gap or overlap in your insurance. To achieve this seamless transition, you must report the change to the Marketplace before the new coverage starts. Accurately setting the end date is important for reconciling any Advance Payments of the Premium Tax Credit (APTC) you may have received, which is calculated based on the months you had Marketplace coverage.
Step-by-Step Guide to Marketplace Termination
The most direct way to cancel your ACA insurance is by logging into your account on HealthCare.gov or your State-based Marketplace website. After signing in, navigate to your application dashboard to find your current health plan listed under your coverage information. You must select the option to report a change or manage your current coverage, which leads you to the termination process.
You will be prompted to select the exact date you want your coverage to end, which should be chosen carefully based on whether you have new coverage lined up or are voluntarily ending the plan. The system requires you to confirm the cancellation and attest to the information provided before submitting the termination request. It is important to save any confirmation notice, reference number, or email you receive as proof that you completed the termination process.
If you face difficulties with the online platform, you can terminate your coverage by calling the Marketplace Call Center. A representative can help you complete the cancellation over the phone, confirm your identity, and ensure the correct end date is applied. This method is especially helpful if you need the coverage to end sooner than the online system default allows or if you are only terminating coverage for certain people on your plan.
Tax and Documentation Requirements After Canceling Coverage
After your ACA coverage ends, the administrative process continues into the following tax season, primarily focused on reconciling any financial assistance received. You will receive Form 1095-A, the Health Insurance Marketplace Statement, early the following year from the Marketplace. This document reports details about your policy, the premiums paid, and any Advance Payments of the Premium Tax Credit (APTC) paid on your behalf during the months you were enrolled.
Form 1095-A is necessary to complete IRS Form 8962, which is used to reconcile the APTC with the actual Premium Tax Credit (PTC) you qualify for based on your final annual income. If your income increased during the year and you received more APTC than you were eligible for, you may be required to pay back some or all of the excess amount with your tax return. Conversely, if you did not receive the full credit you were due, filing Form 8962 allows you to claim the difference as a refundable tax credit.
Failure to accurately report income changes or reconcile the subsidy by filing Form 8962 can affect your ability to receive APTC for future Marketplace coverage. Retain all documentation related to your cancellation, including the termination confirmation and your Form 1095-A, for a minimum of three years. This record-keeping ensures you can address any inquiries from the Internal Revenue Service regarding your health coverage and tax credits.