Can you cancel health insurance at any time? Not if you have a group health insurance policy through your employer. And in 2022, 54.5% of the U.S. population had employment-based health insurance coverage, according to the U.S. Census Bureau. With an employer-sponsored health insurance plan, you can cancel only during open enrollment or if you have a life status change event. (However, the rules for canceling individual and Marketplace insurance plans are different.)
Small and mid-sized business owners, managers and human resources professionals should be aware of the rules governing health insurance cancellations. They might have to advise their employees and help them if they want to make changes or cancel health insurance. This article discusses:
Outside of the open enrollment period, employees may cancel their employer-sponsored group health insurance only if they have a life status change event, sometimes called a qualifying life event (QLE). Time periods allowed for these mid-year changes are called “special enrollment periods.” Life status change events that may entitle employees to cancel their insurance mid-year include:
For some life status change events, special enrollment periods are mandatory, but for others, they are optional. In those cases, it is up to the employer to decide whether its benefits plan will allow employees to change their plans or waive coverage.
Employer-sponsored group health insurance plans are governed by federal regulations. If the health insurance is provided as part of a cafeteria plan (a “Section 125 plan”), and employees are paying for their coverage using pre-tax dollars, then IRS rules do not allow employees to alter their plan selections mid-year without a valid life status change event.
If you are an employee who is eligible to cancel your plan, you should follow these steps:
The open enrollment period is a window of time for employees to compare plans, consider their needs for health services, and change or cancel their employer-sponsored health insurance plans. Open enrollment occurs once a year. The time and length of the period is up to the employer. Typically, for calendar-year benefit plans, open enrollment starts in November and lasts a few weeks.
When employees elect an insurance policy during open enrollment, they are locked into it for the entire plan year, unless they experience a life status change event that has a special enrollment period.
If you have a life status event, it may trigger a special enrollment period when you can cancel or make other changes to your health plan. Special enrollment periods for employer-sponsored group plans are generally 30 days long but may be longer based on the event.
Before you cancel your employer-provided group health insurance plan, you should be aware of what might happen as a result. These are some of the possible consequences of cancellation:
If you are an HR professional, small business owner, or manager, resources you provide might help an employee make the right decisions on matters of the utmost importance. You can get support with TriNet PEO offering. With a TriNet-sponsored plan, you can worry less about compliance and get help in navigating benefits compliance and requirements for COBRA, Affordable Care Act, disability and other filings. TriNet PEO is here to help you.
This communication is for informational purposes only, is not legal, tax or accounting advice, and is not an offer to sell, buy or procure insurance.
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