Let’s tell it like it is: Health insurance is hard to understand and even harder to shop for. One of the most basic questions you might have—when can I sign up for health insurance?—has a surprisingly confusing answer. But that’s what we’re here for.
In this article, we outline the changes that were made to how people buy health insurance after the Affordable Care Act (ACA) was passed, how special enrollment periods (SEPs) work, and how you can use an SEP to purchase health insurance.
Why was open enrollment created?
It might be hard to remember, but before the ACA was passed, you could apply for health insurance whenever you wanted. After applying, you had to go through the underwriting process where you’d be asked about your medical history and any pre-existing conditions you may have.
The result was that you could be denied coverage outright, charged more for the same coverage offered to someone else, or have any pre-existing conditions excluded from coverage. While this worked great for insurance companies, it left a lot of people without access to quality healthcare.
Introducing, the Affordable Care Act
Once the ACA went into effect, anyone could now get health insurance regardless of their medical history or pre-existing conditions. Now, all those people who were left out in the old system could get guaranteed, quality coverage.
But if insurance companies had to offer coverage to anyone regardless of their health status and people could apply for coverage at any time, then people would only apply for coverage when they needed it. In that scenario, only sick people would be covered and premiums would skyrocket.
Healthy people help make insurance cheaper
Health insurance companies can only exist if they have money coming in from healthy people that don’t use their plans since that money pays for the cost of insuring the less healthy population.
That’s why open enrollment was created. By only allowing people to buy insurance during a fixed, short window of time every year—November 1 through December 15—both healthy and sick people are incentivized to sign up.
Some states have extended their open enrollment periods instead of using the federal one. For more information about each state’s open enrollment, check out our state-by-state guide.
Sick people would sign up anyway since they know they need the coverage, but healthy people would sign up as well since sickness and injuries can’t always be predicted ahead of time and the financial risk of going uninsured is so high.
As a result, this lowers the cost for everyone and helps people who otherwise may not have been covered to pay for medical expenses.
How do special enrollment periods work?
Now that you know how open enrollment works, you might be wondering about what happens if you need coverage outside of the open enrollment period. Thankfully, you’re not the only one who had that thought. That’s why SEPs were created.
If you have a qualifying life event—think things like getting married or divorced, losing your job, or having a child—you’re able to get insurance even if it’s not during the annual open enrollment period. Once the life event occurs, you have 60 days to shop for and purchase a health insurance plan on the Marketplace. If you don’t purchase insurance within those 60 days, then you have to wait until the annual open enrollment period at the end of the year to get insurance.
A new SEP for health reimbursement arrangements
In 2020, a new qualifying life event was added for individuals who had been newly offered a qualified small employer health reimbursement arrangement (QSEHRA) or individual coverage health reimbursement arrangement (ICHRA). If your employer offers you one of those two HRAs at any point throughout the year, you don’t have to wait until the end of the year to get insurance.
The result was that employers no longer have to try to time their new health benefit offering with open enrollment if they want their employees to be able to get insured right away. They can now implement health benefits on their own timeline.
Hello, HRAs; goodbye, short-term plans
This was a big win for employees since it made it much easier and more convenient to get insurance coverage. Even if they had help from their employer with an HRA, they no longer had to worry about lapses in coverage or trying to bridge the gap with things like short-term plans.
For employers, the change showed government support for these HRAs and legitimized the reimbursement model for health benefits, which works better for a lot of organizations when compared to traditional group health insurance.
How do you use an HRA special enrollment event to buy health insurance?
Regardless of the type of qualifying life event you have, you’ll be asked to provide proof that the event occurred. When you’re offered a QSEHRA or ICHRA, your employer will provide you with a notification letter that has the start and end dates for the plan as well as the amount of money you’re offered in allowances. You’ll be asked for this information when shopping on the health insurance Marketplace, so make sure you keep your notice on hand.
Note: If your state runs its own Marketplace instead of using healthcare.gov, you may need to get in contact with them since this is still a pretty new change and may not be incorporated into their website.
Once your life event has been verified, you’ll be able to shop for health insurance just like you would during open enrollment. In most cases, it’s a good idea to consult with a health insurance broker before choosing a plan. They don’t charge for their services and can help you evaluate your available plan options and choose the best one based on your unique needs and budget.
Open enrollment was created to help ensure both healthy and sick people signed up for health insurance which keeps costs down for everyone. But sometimes life happens and you need insurance before open enrollment comes around.
In some cases, you may qualify for a special enrollment period that gives you 60 days to shop for and purchase health insurance even outside of open enrollment. Starting in 2020, employees who became newly eligible for a QSEHRA or an ICHRA would now qualify for an SEP.
As long as you have the documentation you need to prove your eligibility to either the federal or your state’s health insurance Marketplace, you can use those 60 days to shop for a health insurance policy and get the coverage you need.