Health insurance can be confusing and challenging for both employers and employees. If you feel stuck in your current health plan, you may be asking yourself, “Can I change my health insurance plan mid-year?”
The good news is that you’re not locked into your health insurance plan forever. However, there are rules for mid-year changes that are vastly different based on if you’re an employer or an employee.
Employers can usually make plan changes at any time, but they face complex restrictions and potential penalties. Employees have more flexibility in what they can change, but can only do so during specific enrollment times.
This blog will guide employers and employees through their options for making mid-year changes to their health insurance plans.
Can I change my health insurance plan mid-year?
Health insurance changes are generally done at the start of a plan year, giving your employees time to consider their options during the open enrollment period. However, as an employer, you’re able to make changes to your health plan at any point during the year.
While this may seem enticing, changing employer-sponsored health insurance plans outside of open enrollment could leave employers prone to restrictions and compliance challenges. So be sure to check your current health plan document for any limitations or penalties.
The annual open enrollment period typically runs from November 1 to December 15, but the exact dates can vary depending on which state you’re in. During this time, an employee can renew their current health plan or search for other coverage options. Coverage usually begins on January 1 or February 1, depending on enrollment.
Employees can make as many health insurance plan selections and changes during the annual open enrollment period as long as they finalize their choice by the end of the period. Once the period is over, changes can’t be made unless they have a qualifying event triggering a special enrollment period—more on those below.
Which are the requirements to make changes outside the open enrollment period?
Even though employers can make changes to their coverage at any time during the year, they need to follow specific requirements to stay in compliance and avoid penalties if the changes are made outside of open enrollment.
The three requirements below are necessary to consider for employers making mid-year plan changes:
- ERISA plan documents: ERISA summary plan descriptions and plan documents are legal documents containing relevant health plan information. If an employer makes plan changes, an ERISA summary of material modification document must be created and distributed to employees within 210 days after the plan year containing the change ends.
- Affordable Care Act (ACA) requirements: The ACA requires mid-year notification requirements in addition to ERISA’s requirements. Employers must give 60 days advance notice of plan changes before implementing them.
- Enrollment changes: When an employee’s health plan costs change mid-year, employees must be given the right to change their health plans, creating a mini open enrollment for the employer’s affected employees. Employers should notify their insurer so they can approve and allow mid-year changes for employees as part of the mini open enrollment period.
Outside of open enrollment, an employee can only change their health plan during a special enrollment period. A special enrollment period can occur year-round and applies only to those who have experienced a qualifying life event.
Several life events qualify for a special enrollment period, including:
- Getting married, divorced, or legally separated
- Giving birth or adopting a child
- Beginning, ending, or losing employment
- Loss of coverage, such as turning 27 and losing your parent’s coverage
- A death in the family
- Moving to a new ZIP code or county
- Other qualifying events
In most cases, employees have 60 days from the date of their qualifying life event to change or buy a health plan. Like open enrollment, employees can shop for and compare plans by working with a broker or visiting their state or federal health insurance marketplaces. In some cases, proof of the qualifying life event is required before enrollment.
What kinds of changes can I make to my plan mid-year?
A popular reason employers make changes to their current health plan is to control rising health insurance costs. However, employers also make a few other common changes outside the open enrollment period.
The following are changes employers can make mid-year without penalty:
- Change in current health plan: Employers may consider switching to a cheaper plan to save money on their monthly premium. Many employers also consider switching plans if their employees’ services are adjusted due to a contract dispute or cancellation between the insurance and their in-network providers.
- Employee contribution changes: Employers looking to make contribution changes to their health plan should review their liability under the ACA’s employer shared responsibility rules and confirm their new contributions continue to satisfy the carrier’s minimum participation requirements. They should also determine if their plan allows employees to change their benefit elections due to mid-year contribution changes.
- Waiting period: If an employer wants to add a waiting period to their employee’s health plan, it can be done mid-year. However, the ACA prohibits waiting periods of more than 90 days.
The IRS provides specific instances when employees can make mid-year changes to their health benefit. Employees can make mid-year plan changes if they have a qualified life status change that would affect their health insurance policy.
Qualified life status changes include:
- Change in legal marital status
- Change in the number of dependents
- Death of spouse
- Change in dependent status, such as a dependent losing coverage under another plan
- Change in employment status
- Loss of eligibility
- A dependent called to military service
- Change in residence
- Entitlement to Medicare or Medicaid
- Significant cost changes in coverage
- Health Insurance Portability and Accountability Act (HIPAA) special enrollment rights
Employers aren’t required to allow employees mid-year elections changes except if making changes under HIPAA special enrollment rights. For clarity, employers should include in their plan documents and summary plan description which circumstances entitle an employee to make mid-year election changes.
How employers can use an integrated HRA to provide their employees more coverage mid-year
Making mid-year health plan changes can be difficult for employers. If you’re looking to provide a better health benefit for your employees, a health reimbursement arrangement (HRA) is worth looking into. With an integrated HRA, also known as a group coverage HRA (GCHRA), you can keep your existing group health insurance plan and provide more comprehensive health coverage to your employees.
Integrated HRAs work with traditional group health insurance to reimburse employees tax-free for qualified medical expenses that aren’t fully paid for in their plan, such as deductibles, coinsurance, copays, and other out-of-pocket medical care. Only employees enrolled in the employer-sponsored coverage can participate in the HRA.
With integrated HRAs, employers set a monthly allowance that works for their budget. While some HRAs have annual contribution limits, integrated HRAs have no minimum or maximum contribution requirements.
Unlike a health savings account (HSA), HRAs are not pre-funded accounts. The employer only pays out when an employee submits a medical expense for reimbursement. Additionally, unused allowance amounts stay with the employer if an employee leaves the company.
The great thing about integrated HRAs is that employers can sign up for one at any point during the year without an enrollment period. Integrated HRAs work with any group health plan, so there’s no need to make mid-year changes to your plan.
Employers can simply implement an integrated HRA to supplement their health plan and begin providing their employees with tax-free reimbursements for healthcare items.
Choosing a health plan is a big decision for employers and employees. If you’re an employer that wants to improve your health insurance plan, but doesn’t want to go through the mid-year hassle of making changes, implementing an integrated HRA at your organization is a great option.
With an integrated HRA, you can offer your employees a more personalized health benefit without changing your current group health coverage details. Don’t wait to give your employees an HRA—schedule a call with PeopleKeep and we’ll get you started!