The Affordable Care Act provides the ability for individuals to buy coverage regardless of any underlying medical condition. This guaranteed issue provision has provided millions of Americans the access to health care that was not there before. Many who had access to group coverage have also shifted either themselves or dependents to individual plans when their group plans were too expensive or did not provide the coverage they needed.
This year’s annual Open Enrollment Period for the Marketplace has opened and we are seeing, on average, a 25% increase to the cost of individual plans. This cost increase is forcing many who are enrolled there to re-evaluate if an individual plan is still the best option for them when other group coverage is available through an employer. When making this decision around where to be covered, there are two important items that should be understood about moving onto or coming off of an employer-sponsored health plan.
First, the annual Open Enrollment Period for the Marketplace is not considered a qualifying event under the IRS guidelines to allow someone to drop their individual policy and enroll in an employer-sponsored group plan. There seems to be a common misconception around this with both employers and employees. As the costs for individual plans continue to rise, many are looking for ways to move back to an employer’s plan. The only instance in which someone could leave their individual plan and move onto their employer’s group plan is if the group plan is in an open enrollment period.
Another thing to consider is that the Marketplace Open Enrollment Period is not a qualifying event that will allow someone to drop a spouse or dependent from their group plan (unless the group plan’s annual open enrollment period coincides.) So those who may be considering moving a dependent to an individual plan would not have the ability to do so at that time. However, a special provision in the rules does allow an employee the ability to make a mid-year revocation of their group plan (outside of the group’s open enrollment) and enroll in Marketplace coverage. In order for an employee to move a spouse or dependent to an individual plan during the Marketplace Open Enrollment Period, the employee must also drop coverage for him or herself too.
This recent webinar details more information on the IRS Section 125 rules and what is and is not permissible with respect to moving on and off of plans. Given the rising costs of individual plans it seems unlikely that many will want to shift away from the group coverage. It is important for employers to know the rules around allowing employees to come on and off of their plans outside of their annual open enrollment period. Employees should understand the potential pitfalls of shifting away their group plan as that could create the opposite impact of what they are trying to achieve.