Guide to mid-year plan changes

If you’re an employer who offers a group health insurance plan or an employee enrolled in an insurance policy, you may ask yourself, “Can I change my health insurance plan mid-year?”

You’re not locked into your health insurance plan forever. However, there are rules for mid-year changes that vary depending on whether you’re an employer or an employee. Employers can usually make plan changes anytime but 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.

Takeaways from this blog post:

• Employers can generally make changes to their health insurance plan at any point during the year but must meet specific requirements to avoid penalties.
• Employees can only update or change their health plans during the open enrollment period or a special enrollment period triggered by a qualifying life event.
• Both employers and employees should carefully review plan documents and requirements before making any mid-year changes to a health insurance plan.

Can I change my health insurance plan mid-year?

Whether or not you can change your health insurance plan mid-year depends on whether you’re an employer or an employee. Let’s explore scenarios for both groups below.

Employers

As an employer, you’ll generally make changes to your health insurance plan that take effect at the start of a plan year, giving your employees time to consider their options during the open enrollment period if they don’t want to enroll in your group coverage. However, you can typically make changes to your health plan at any point during the year.

While changing your organization's health insurance policy may seem like a good idea in some cases, changing your employer-sponsored health plan could negatively impact employee participation. So check your current health plan document for any limitations or penalties.

Employees

If employees have an employer-sponsored group plan, they may be able to switch from one plan option to another or cancel their plan mid-year if the following circumstances apply:

• The employee pays for their insurance premium with post-tax dollars
• Their employer offers multiple group plan options and has designed their plan to allow for midyear changes

If an employee pays for their insurance premium with pre-tax dollars, they can only change their plan under specific circumstances.

If employees have individual health insurance coverage and want to switch health plans or make changes to their current plan, they only have two periods to do so—during the open enrollment period or a special enrollment period.

The annual open enrollment period typically runs from November 1 to January 15, but the exact dates can vary depending on your state. During this time, employees can renew their existing individual health plans or search for other coverage options.

Depending on when enrollment in a health plan occurs, health insurance coverage usually begins on January 1 or February 1. For coverage to start on January 1, employees must enroll by December 15.

Employees can make as many health insurance plan selections and changes as they like during the annual open enrollment cycle as long as they finalize their choice by the end of the period. Employees can only make changes to individual plans once the period is over if they have a qualifying life event triggering a special enrollment period.

What are the requirements for making changes outside the open enrollment period?

Typically, you can only make changes to your health insurance plan during open enrollment. However, there are a few instances where you can make mid-year changes, provided you meet specific requirements.

Employers

Even though employers can change their current health insurance coverage at any time, they must follow specific requirements to stay in compliance and avoid penalties if they do so outside of their plan’s open enrollment.

Employers must consider the three requirements below when 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, they must create and distribute an ERISA summary of material modification document to employees within 210 days after the plan year containing the change ends.

• Affordable Care Act (ACA) requirements: The ACA and ERISA require employers to give their employees 60 days' advance notice of plan changes before implementing them.

• Enrollment changes: When an employee’s health plan costs change mid-year, employers must give the employees the right to change their health plans, creating a mini-open enrollment for the employer’s affected employees.
  • Employers should notify any relevant health insurance companies so they can approve and allow mid-year changes for employees during the mini-open enrollment period.

Employees

Employees with a group plan can only make changes to or cancel their plan if they experience qualifying “change in election” events. We’ll cover these in the next section.

Outside of open enrollment, employees with marketplace plans can only change their health plan during a special enrollment period if they meet specific eligibility requirements. A special enrollment period can occur at any point during the year and applies only to those who have experienced a major life event.

Several common events qualify individuals 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 eligibility criteria, such as turning 26 and losing your parent’s coverage
• A death in the family
• Moving to a new ZIP code or county
• Other qualifying events¹

In most cases, employees have a 60-day window from the date of their qualifying life event to change or buy a health plan. Like open enrollment, a special enrollment period allows employees to shop for and compare plans by working with a broker or visiting their state or federal health insurance marketplaces. Sometimes, health insurance providers may require proof of the qualifying life event before enrollment.

What kinds of changes can I make to my plan mid-year?

You may want or need to make changes to your health plan for various reasons. But, acceptable reasons will vary depending on whether you’re an employer or an employee.

Employers

If an employer is considering changes to its group policy due to a reason like rising medical care costs, there are a few ways it can modify its plan.

The following are changes employers can make mid-year without penalty:

• Change in a current health plan: Employers may consider switching to a cheaper health plan, like a high-deductible health plan (HDHP), to help them and their employees save money on their monthly premiums.
  • Many employers also consider switching plans if an insurer adjusts their employees’ covered services due to a contract dispute or cancellation request between the insurance and a provider.
• 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: Employers can add a waiting period to their employees' health plans mid-year. However, the ACA prohibits waiting periods of more than 90 days.

Employees

The IRS provides specific instances when employees can make mid-year changes to their health coverage. For example, employees can make mid-year plan changes if they have a qualified life status change that would affect their health insurance policy.

Individuals must update their insurance provider about these changes, which may impact their eligibility, health insurance options, and monthly premium costs.

Qualified life changes and eligible events include:

• Change in legal marital status
• Change in the number of dependents
• Death of spouse
• Change in dependent status, such as a dependent child losing coverage under another plan
• Change in employment status
• Loss of eligibility criteria
• Loss of coverage
• A dependent called to military service
• Change in residence
• Significant change in household income
• 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 to make mid-year election changes except if they are making changes under HIPAA special enrollment rights. For clarity, employers should include in their plan documents and summary plan descriptions which special circumstances entitle employees to make mid-year election changes.

How employers can use an integrated HRA to provide their employees more coverage mid-year

In some cases, employers make mid-year health plan changes to save money on their group policy. However, this can leave employees liable for covering a greater share of their medical costs. To combat this scenario, adding a health reimbursement arrangement (HRA) to your health benefit is worth considering.

While some HRAs act as a stand-alone health benefit, an integrated HRA, also known as a group coverage HRA (GCHRA), pairs with your existing job-based health insurance plan and provides more comprehensive health coverage to your employees.

Integrated HRAs work with traditional employer health plans, like group health insurance, to reimburse employees tax-free for qualified medical expenses their plan doesn’t fully cover, such as deductibles, coinsurance, and other out-of-pocket costs. Only employees enrolled in your employer-sponsored health insurance plan can participate in the HRA.

With integrated HRAs, employers set a monthly allowance that works for their budget. This allowance can be as large or small as the employer chooses.

Unlike a health savings account (HSA), HRAs are not pre-funded accounts. The employer only pays out when employees submit medical costs 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 also work with any group health plan, so you can choose the group policy that works best for your team.

Employers can simply implement an integrated HRA to supplement their health plan and provide their employees with tax-free reimbursements for their medical bills.

Conclusion

Choosing a health insurance policy is a big decision for employers and employees. If you’re an employer or employee who wants to make changes to your health plan, it’s essential to understand the guidelines you need to follow.

If you’re an employer looking to improve your employee benefits package, 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 to cover their medical care without changing your current group health coverage.

This article was originally published on May 11, 2022. It was last updated on May 31, 2024.