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California health insurance  -  Individual California health insurance  -  1st Payment for Individual health coverage

Why is Payment Required Up Front With the Individual Health Application?

We'll typically get a call from a California health insurance shopper that they have completed the entire application except for the payment section. hey don't feel comfortable submitting payment before they even know they are approved or they wonder if payment is submitted, are they de facto approved?

These are great questions and concerns which we should address since health insurance in California is a very unique product. These questions also reflect recent tightening of rules by the major carriers following health reform changes so let's jump in...why is the first month's premium payment required with the application?

Why Does Health Insurance Require 1st Months Payment

We'll hope to allay the suspicion. When you're completing the California health application online, you cannot finalize the app without completing the payment page and this goes to the root of what the health insurance contract is. Way back when (maybe 10 years now), the carrier required payment (by check then) up front with the application.

The contract states that the applicant's part of it is to submit payment and the insurer's part is to cover health expenses as outlined. To actually complete the contract, payment for at least one month's premium must be submitted up front.

This does not mean that we are approved. Approval is subject to medical underwriting which usually takes about two weeks. They will not actually process the payment until approval and then it occurs within 1-2 days. Approval usually takes about two weeks from when the online health insurance application is submitted.

So what if we don't like the offer or we change our mind during underwriting or even following the offer?

What Protects the California Consumer if They Change Their Mind?

In California, we can cancel the policy for any reason with a full refund within 10 days from when they notified us of their offer. This is the consumer's protection and it works really well.

We've never seen an issue where someone was forced to take a policy they didn't want. So how can we submit the first month's premium especially assuming that we're using the online application which is how the vast majority apply for California health insurance?

Options for California Health Insurance 1st Payment

There are three options, the first two of which are much faster. We can use credit card or auto-deduction for the initial month's premium in which case, the entire process can be handled electronically online.

We can also submit the first month's premium by check but they will not underwrite the application until it is received in house (made out to the carrier) which can slow down the process significantly.

For this reason, credit card or auto-deduction are best approaches for the 1st month's premium. Credit card is no longer available for re-occurring payments but we can still use it for the 1st month to get the application rolling. A good 90% of new application use the credit card for the 1st month's premium. If you cancel the policy, the refund will go back to the card.
So that's the conspiracy...we promise. Most other types of insurance require the payment up front to secure the contract as well. Now, California health insurance has come back into the fold.


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