Special Enrollment Periods for Employer-Sponsored Health Insurance

If you have health insurance in the U.S., there’s a good chance your coverage is sponsored by an employer—either your own, your spouse’s, or a parent’s. Roughly half of all Americans have health coverage under an employer-sponsored plan.

Employer-sponsored health plans are available to employees when they first become eligible for the coverage and annually during the employer’s open enrollment period.

Unlike the individual insurance market, this window is not set by the government. It varies from one employer to another, and the plan year for employer-sponsored health coverage isn’t always the same as the calendar year.

But employees also have an opportunity to enroll or make changes to their coverage during special enrollment periods, which are linked to certain qualifying life events.

This article will explain what you need to know about special enrollment periods for employer-sponsored health plans. You’ll learn how they differ from special enrollment periods for individual health insurance and employers’ flexibility in terms of special enrollment periods.

What Are Special Enrollment Periods for Employer-Sponsored Health Coverage?

Special enrollment periods give employees an opportunity to enroll in coverage, add or drop family members from the plan, switch to a different plan (if the employer offers multiple plan options), or drop their coverage altogether.

Special enrollment periods are also an opportunity to start, stop, or make changes to an employee’s flexible spending account (FSA) contributions. (Note that health savings account—HSA—contribution changes do not require a special enrollment period, and can be started, stopped, or changed at any time.)

These enrollment opportunities are available when an employee first becomes eligible for coverage, and each year during the employer’s annual open enrollment period. But they are also available if an employee experiences certain qualifying life events that trigger a special enrollment period.

Note that in the individual (self-purchased) market, coverage can be dropped at any time, and family members can be removed from a plan at any time. That is not the case for employer-sponsored health insurance, which can only be dropped during open enrollment or a special enrollment period.

How Are Special Enrollment Periods Regulated?

For employer-sponsored health coverage, special enrollment period rules are in the Code of Federal Regulations. Specifically, 29 CFR § 2590.701-6, and in permitted election changes for Section 125 plans (26 CFR § 1.125-4).

Section 125 plans are used by most employers that offer health coverage, as they are the mechanism that allows employer-sponsored health plans to be offered on a pretax basis (the premium is deducted from payroll before taxes are).

(Note that the special enrollment period rules for employer-sponsored plans are not the same as the rules for individual health insurance special enrollment periods, which are detailed at 45 CFR § 155.420.)

When an employee experiences a qualifying life event, the employer must generally allow them a special enrollment period of at least 30 days, during which they can enroll or make changes to their coverage, or drop their coverage (note that this differs from the individual market, where special enrollment periods generally last 60 days).

Qualifying Life Events

Several qualifying events will trigger special enrollment periods for employer-sponsored health insurance. They include marriage, birth or adoption of a child, and involuntary loss of other health coverage.

Involuntary loss of other health coverage includes loss of other employer-sponsored coverage, loss of individual market coverage, loss of Medicare or Medicaid coverage, or the exhaustion of COBRA. And it also includes situations in which a current or former employer’s contributions to the person’s premiums terminate.

The loss of short-term health insurance does trigger a special enrollment period for employer-sponsored health insurance. (That is not the case for individual market health insurance; the termination of a short-term health plan does not give a person an opportunity to enroll in an individual market plan.)

Loss of other health coverage is not considered a qualifying event if the person chooses to cancel it or fails to pay the premiums.

Optional Qualifying Life Events for Section 125 Plans

In addition, an employer that offers a Section 125 plan (again, that’s how employers offer health benefits on a pretax basis) has the option to offer special enrollment periods for a variety of other circumstances, but is not required to do so. These circumstances include:

• Change in marital status
• Change in the number of dependents
• Change in employment status
• Dependent becomes newly eligible or newly ineligible for coverage under the plan
• Change in residence
• Becoming eligible for Medicare or Medicaid
• Significant changes to the plan’s cost or benefits
• An improved or new benefits package option
• Changes in the coverage offered by another employer’s plan that covers the employee
• Eligibility to enroll in an individual market plan: The employer can allow an employee to drop the employer-sponsored plan due to eligibility to enroll in a plan through the health insurance marketplace/exchange, either during a special enrollment period or open enrollment. The new marketplace plan must take effect no later than the day after the employer-sponsored plan ends.
  

Summary

For employer-sponsored health plans, there are specific, federal rules for when employees can enroll or drop coverage, add or drop family members from the plan, or switch to a different plan (if multiple plans are offered).

Enrollment opportunities are available when an employee initially becomes eligible for the employer’s coverage and during the employer’s annual open enrollment period. But they are also available during special enrollment periods triggered by certain qualifying life events.

Special enrollment periods generally must last at least 30 days. Some qualifying events—such as loss of other coverage—always trigger a special enrollment period, while others are optional for the employer and may or may not be offered.

A Word From Verywell

If you have employer-sponsored health insurance, pay close attention to your plan options during open enrollment, and try to pick the coverage that makes the most sense for you (and your family, if you’re covering anyone besides yourself).

Understand that your plan choice and your FSA election, if applicable, will generally be locked in for the full plan year. But also know that if you have a change in circumstances, you may be able to enroll, drop, or change your coverage mid-year.

Your employer will explain how their rules work, and the better you understand them, the better you’ll be able to navigate the process if and when you have a qualifying event.