Can you switch health insurance at any time?

Whether you’re an employer or an employee, switching health insurance can feel daunting. Below, we’ve broken it down for employers and employees to navigate mid-year transitions.

For employers

Can employers change health insurance plans for their organizations mid-year? Unlike employees, for whom there are strict rules governing when they can enroll or switch healthcare, employers can change policies at any time. Depending on their current health benefits, employers should familiarize themselves with contractual obligations or restrictions and provide their employees with sufficient notice before modifying their plan.

For employers with traditional group health plans, the renewal process often begins several months before the actual renewal date. This is to ensure that there is ample time for reviewing plan options, negotiating rates with insurance companies, and communicating changes in benefits and pricing to employees. Most employers operate their health benefits according to the calendar year, so January 1 renewals are most common. Many employers have July 1 renewals, or at other times of the year.Employers should generally start preparing for renewals 90 to 120 days before the end of their plan.

Many employers are adopting Individual Coverage Health Reimbursement Arrangements (ICHRAs) as an alternative to group health insurance. ICHRAs allow employers to set healthcare budgets at the beginning of the year so that employees can purchase individual health insurance and receive tax-free reimbursement. When an employer offers an ICHRA to their employees for the first time, employees gain access to a Special Enrollment Period and can re-enroll in individual healthcare mid-year.

Employers should keep the following in mind whenever they modify their healthcare plans:

• Documentation.  Employers typically need to update their employee healthcare materials before changing their healthcare offering. These include Plan Documents, Summaries of Benefits and Coverage (SBCs), and other compliance notices.

• Notice. Employers must give sufficient notice to their employees before their new healthcare offering takes effect. The Affordable Care Act (ACA) and Employment Retirement Income Security Act (ERISA) require 60 days advance notice.

• Contractual Obligations. Employers should be aware of any contractual obligations under their current healthcare plan to avoid penalties. 

Switch health insurance mid-year with an ICHRA

If you’re an employer interested in changing the healthcare you offer your organization, ICHRA might be the right fit. Employers who offer ICHRA for the first time trigger a Special Enrollment Period, allowing their employees to re-enroll in an individual plan mid-year.

What is an Individual Coverage HRA

ICHRAs are an alternative to traditional group healthcare plans, introduced in 2020. With ICHRAs, employers set healthcare allowances for their employees at the beginning of the year, which employees can spend on individual insurance plans and other qualified medical expenses. Reimbursements up to the allowance amounts are tax-free for the employer and employee. 

ICHRAs are often more flexible than traditional group healthcare because employees can shop the healthcare marketplace to find a policy that best suits their needs. Employees can elect to join a healthcare network with great coverage in their area, and they often spend less out-of-pocket than they would with a traditional plan. With an ICHRA, employers don’t have to guess what their employees want. Instead, employees can spend their tax-free healthcare budget on whichever insurance provider works best for them.

ICHRA Special Enrollment Period

One of the benefits of ICHRA is that employers can offer it to employees mid-year. While employees can typically only switch health insurance during Open Enrollment or during a Special Enrollment Period, the ICHRA offer is considered a qualifying life event which allows for mid-year re-enrollment.

In most cases, the ICHRA Special Enrollment Period commences 60 days before the start of the ICHRA. New hires who can’t take full advantage of the 60 day Special Enrollment Period before the start of the ICHRA have 60 days after the ICHRA begins during which they can enroll in an individual plan.

ICHRA: An alternative to traditional group healthcare

Switching healthcare plans can be a challenge, and the complex rules around mid-year plan changes doesn’t make it any easier. If you’re looking for a cost-effective alternative to group healthcare that gives employees more power to great benefits, an ICHRA might be the right fit. 

Thatch makes it easy for you to navigate healthcare benefits and the right coverage for their employees.  

For employees

Employees with employer-sponsored group plans can typically only enroll or switch insurance policies during Open Enrollment. However, employees that experience a qualifying life event can take advantage of Special Enrollment Periods to change plans mid-year.

Qualifying life events include:

• Getting married

• Getting divorced

• Adding a family member (birth, adoption, fostering)

• Death of spouse

• Moving to a new ZIP code or county

• Loss of job-based coverage

• Loss of individual coverage due to a change in household income

• Being offered an ICHRA for the first time

Unless employees qualify for an Special Enrollment Period, they typically can't switch healthcare outside of Open Enrollment.

What are the steps to switch health insurance outside of Open Enrollment?

Employees looking to switch health insurance outside of Open Enrollment, should keep the following in mind while getting ready to re-enroll: 

1. Identify a Qualifying Life Event (QLE): These include marriage, divorce, the birth or adoption of a child, or being offered an ICHRA for the first time. Depending on the Special Enrollment Period, it will last either 30 or 60 days.

2. Document the Event: Depending on the qualifying life event, make sure to save the relevant documentation. This could be a marriage certificate, birth certificate, an employment termination letter, or an invitation from your employer to join an ICHRA. Insurance providers will typically ask for documentation before allowing you to re-enroll outside of Open Enrollment.

3. Research New Plans: If you have a traditional group plan through your employer, work with your company’s benefits administrator to find another available option that satisfies your needs. If you have an ICHRA, you can shop for your plan directly from insurance carriers, through a marketplace, or with the help of a broker.

4. Terminate Your Existing Coverage: If you have a traditional group plan through your employer, let your company’s benefits administrator know that you’ll be switching your policy. If you have an ICHRA, you can let your insurance carrier know about the upcoming charge.

5. Enroll in the New Plan: Complete the necessary enrollment forms from your new insurance provider. Ensure all paperwork is accurate and in advance of any deadlines, which may vary depending on your Special Enrollment Period. The sooner you submit your paperwork, the more likely it is that your preferred carrier will be able to enroll you before your desired start date.

Keep in Mind

Employers can generally switch health insurance for their employees mid-year, but they should be mindful of contractual obligations, notice requirements, and other restrictions. Employees are typically allowed to enroll or switch insurance during Open Enrollment or during a Special Enrollment Period. Employers who switch to ICHRA trigger a Special Enrollment Period for their employees, allowing them to re-enroll in a new insurance plan mid-year.

This article provides general information about insurance and is intended for educational purposes only. It may not be applicable to your situation or business, and you may have obligations or considerations not presented in this article.

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