Health insurance premium payment thresholds define the minimum amount an enrollee must pay to remain in good standing and avoid a grace period. The 2025 ACA Marketplace Integrity and Affordability Final Rule — published by CMS in June 2025 — eliminated the fixed dollar and gross premium percentage threshold methods and required health plans on both federal and state exchanges to use a net premium percentage threshold of at least 95%. Certifi’s William™ supports configurable threshold rules — including net premium percentage thresholds by population — and automates the delinquency communications triggered when a member falls below their threshold.
When we wrote about the 2025 ACA Marketplace rule, we noted that CMS changed premium payment thresholds insurers could use in health insurance exchanges.
This post covers what premium payment thresholds are, how the 2025 ACA Marketplace rule modified them, and what features premium billing software must have to manage them effectively.
What Is a Premium Payment Threshold?
Health insurance premium payment thresholds are specific rules that determine the minimum amount of a premium payment an enrollee must make to maintain their health coverage if they haven’t paid the full amount due. Health insurers use these thresholds to reduce terminations for small underpayments. The calculations vary, but typically, insurers use either a fixed dollar or a premium percentage method.
Fixed Dollar vs. Premium Percentage Thresholds: What’s the Difference?
As the name implies, a fixed dollar premium threshold considers a member paid in full if they paid within a specific dollar value of their premium. For example, if the fixed dollar threshold amount is $5 and the member paid $400 for a $401 premium, an insurer considers them paid in full. If they paid $395 toward that $401 premium, they would not be considered paid in full and would likely enter a grace period.
If an insurer uses a premium percentage threshold calculation, members must pay within a certain percentage of their premium amount to be paid in full. For example, if the premium percentage threshold is 95% of that $401 premium and a member pays $395, they’d be considered paid in full. However, if they pay less than $380.95, they’d likely enter a grace period.
There are also a couple of premium percentage threshold calculations an insurer may use:
- Gross Premium Percentage: This threshold requires the member to pay a certain percentage of the premium amount before an insurer applies any subsidies or tax credits.
- Net Premium Percentage: This threshold requires the member to pay a percentage of the premium amount after subsidies or tax credits.
What Is a Grace Period?
A health insurance grace period is a limited amount of time after your monthly premium payment due date during which your health insurance coverage remains active, even if you haven’t yet paid your premium. It’s essentially a short extension to pay your premiums before your insurance company can terminate your coverage.
If a member fails to meet the premium payment threshold, they will likely enter a grace period.
What Changes Did the 2025 ACA Marketplace Rule Make to Premium Payment Thresholds?
The rule made two key changes:
- Eliminated the use of the gross premium percentage and fixed dollar premium thresholds. CMS found these thresholds potentially enabled enrollees to remain in good standing for an extended period after making an initial binder payment. For example, for a $10 fixed dollar threshold where the member only has a $1 monthly payment after subsidies, the member could remain in good standing for 9 months without making a payment.
- Set the net premium percentage threshold to at least 95% of the net premium.
These two modifications apply to both the federal exchange and state exchanges. Like many of the rules defined in the marketplace rule, the change sunsets after the 2026 plan year. However, unlike most of the other sunsetting rules, this one doesn’t appear to have been addressed and made permanent in the One Big Beautiful Bill Act (OBBBA). So at this point, it does seem like a short-term requirement.
What Premium Payment Threshold Management Features Should Premium Billing Software Have?
Flexibility is the key for health insurers to manage payment thresholds, subsequent grace periods, and related member communications. At a minimum, a health insurer’s premium billing software should include:
- The ability to set premium payment thresholds based on commonly used calculations. Premium billing software should enable health plans to create thresholds for both fixed dollar and premium percentage thresholds with varying dollar values and percentages.
- Apply different thresholds to different populations. Health insurers have different payment thresholds for distinct populations, e.g., on-exchange versus off-exchange members. Insurers need to be able to carve out payment thresholds for those populations.
- Automate delinquency communications. Though not specifically related to premium payment thresholds, automating delinquency communications based on those thresholds saves health insurers time while improving the rate at which delinquent members make payments. Software that can automatically generate letters, emails or internal notifications based on delinquency rules, including payment thresholds, is key.
Frequently Asked Questions
Q: What is a health insurance premium payment threshold?
A health insurance premium payment threshold is a rule that determines the minimum payment amount an enrollee must make to remain in good standing and avoid entering a grace period. If a member pays within the threshold — whether defined as a fixed dollar amount or a percentage of their net premium — the insurer treats them as paid in full for that billing cycle. Thresholds exist to prevent terminations for small, inadvertent underpayments.
Q: What did the 2025 ACA Marketplace rule change about premium payment thresholds?
The 2025 ACA Marketplace Integrity and Affordability Final Rule, published by CMS in June 2025, made two changes to premium payment thresholds: it eliminated the fixed dollar threshold method and the gross premium percentage threshold method, and it required health plans on both federal and state exchanges to use a net premium percentage threshold of at least 95%. The rule applies through the 2026 plan year. As of publication, the requirement does not appear to have been made permanent in the One Big Beautiful Bill Act.
Q: What is the difference between a gross premium percentage and a net premium percentage threshold?
A gross premium percentage threshold requires members to pay a percentage of their premium before applying any subsidies or tax credits. A net premium percentage threshold requires members to pay a percentage of what they owe after applying subsidies and tax credits. The 2025 ACA Marketplace rule eliminated the gross premium percentage method and requires health plans to use a net premium percentage threshold of at least 95%, meaning members must pay at least 95% of their subsidy-adjusted premium to avoid a grace period.
Q: What billing software features do health plans need to manage premium payment thresholds?
Health plans need premium billing software that supports: (1) configurable threshold rules for both fixed dollar and net premium percentage methods; (2) population-level threshold configuration, so different rules can apply to on-exchange versus off-exchange members or other distinct populations; and (3) automated delinquency communications triggered by threshold events, including configurable letters, emails, and internal notifications. William™ by Certifi supports all three requirements through no-code configuration.
Q: What is a health insurance grace period and how does it relate to payment thresholds?
A health insurance grace period is a defined window of time after a premium due date during which coverage remains active even if the full premium hasn’t been paid. Grace periods are triggered when a member fails to meet their payment threshold for a billing cycle. The length and terms of grace periods vary by market — ACA marketplace enrollees receiving premium tax credits have a federally mandated three-month grace period, while other markets follow state or contract-defined terms.
Q: How does automated delinquency management help health plans respond to payment threshold failures?
Automated delinquency management ensures that every member who falls below their payment threshold receives a timely, configured communication without relying on manual staff processes. Purpose-built billing platforms like William™ trigger delinquency workflows based on threshold rules. William™ can send first notice, second notice, and termination warning letters or emails automatically to the right population with the right message. This reduces the administrative burden on billing teams and improves the rate at which delinquent members cure their balance before termination.
Certifi’s health insurance premium billing and payment solutions help healthcare payers improve member satisfaction while reducing administrative costs.
