Each year, health insurance providers hold an open enrollment period, during which employees of the companies they serve can sign up for coverage or make changes to their existing coverage. For most employees, this is the only time of the year they can make these designations or changes to their health insurance benefits.
The exceptions are when they experience a qualifying event, also known as a "qualifying life event." It is your responsibility as a business owner to ensure you and your employees understand what a qualifying event is, and how to avoid potentially expensive gaps in coverage.
What is a qualifying event?
A qualifying event is a milestone in a person's life that makes them eligible to take advantage of a "special enrollment period" – a span of time outside the open enrollment period during which individuals can make and act on decisions about their health insurance coverage. For example, if an employee has a baby or adopts a child, they can add the child to their insurance plan without waiting for open enrollment.
"Numerous qualifying life events exist, but what they all have in common is the potential to significantly alter your health insurance or preferences," said independent health insurance agent Michael McNulty of Mayfair Medicare. "And whether your new circumstances demand greater protection, affordability, or flexibility, you can use the special [enrollment] period after a qualifying life event to adjust your coverage." [Need help with open enrollment and health insurance benefits? Learn how a PEO can help. Check out our best picks and reviews.]
Which events are considered a qualifying event?
There are four types of qualifying events:
Changes in household
- Divorce or legal separation from a spouse
- Birth or adoption of a child
- Placement of a foster child
- Death of an immediate family member who was covered by the health insurance plan
Changes in residence
- Moving outside the service area of an existing healthcare plan
- Moving to or from a shelter or other transitional housing
- For students, moving to or from the place they attend school
- For seasonal workers, moving to or from the place they live and work
Loss of health coverage
- Turning 26 years old and, as a result, becoming ineligible for healthcare coverage under a parent's plan
- Losing existing health coverage, including employer-sponsored, individual, or student coverage
- Losing eligibility for Medicare, Medicaid or the federal Children's Health Insurance Program (CHIP)
- Changes in income that affect the coverage for which employees are qualified
- Becoming a U.S. citizen
- Gaining membership in a federally recognized tribe or status as an Alaska Native Claims Settlement Act (ANCSA) corporation shareholder
- Leaving incarceration (jail or prison)
- Being discharged from active duty in the U.S. armed forces
- Starting or finishing service in AmeriCorps
Under what circumstances are employees ineligible for the special enrollment period?
Employees who have lost healthcare coverage because their health insurance premiums were not paid cannot purchase other healthcare coverage due to a qualifying life event, said James Major, founder and owner of insurance quote comparison portal Insurance Panda. Committing a fraudulent act also makes people ineligible to use a qualifying event to modify or add health insurance coverage.
A divorce or legal separation is a qualifying life event only if the employee loses healthcare coverage provided by their former spouse's employer. Employees who already have their own healthcare policy at the time of divorce are not eligible for the special enrollment period.
How long does the special enrollment period last?
Time restrictions can vary according to circumstances, and certain special enrollment periods in Medicare can be valid for up to a year. In general, though, the special enrollment period lasts 60 days. That countdown starts the day the qualifying event occurs. If, for example, an employee gets married on Jan. 14, the special enrollment period begins on Jan. 14 and ends on March 14.
"You'll have 60 days from the date of the qualifying event to update your coverage," said Melanie Musson, health insurance specialist at USInsuranceAgents.com. "If you don't do it within that time limit, you'll have to wait until the next open enrollment period."
Employees who are without healthcare coverage because they didn't take advantage of the special enrollment period could suffer a big financial blow, such as a staggering hospital bill in the case of an unforeseen emergency.
How can employers help employees when it comes to qualifying events and the special enrollment period?
It is critical for employers to educate their employees about qualifying events and remind them to utilize the special enrollment when necessary.
"I would encourage employers to be proactive in how they share information about qualifying events," McNulty said. "A best practice is to educate new employees on what a qualifying event is during initial onboarding, or whenever insurance options are shared with employees."
If you learn that an employee has a qualifying event coming up – for instance, they announce that they are getting married or expecting a baby – make a note of it, and remind them to make the appropriate changes to their coverage within the special enrollment parameters.
Just as importantly, urge employees to ask any questions about healthcare plans available through your company and to discuss their options.
You can also take some stopgap measures to help employees. At one time or another, you will probably have employees who are in between enrollment periods but do not qualify for the employer-sponsored healthcare plan because they have not yet experienced a qualifying event. Michael Hammelburger, CEO of The Bottom Line Group, said one option is to provide those employees with short-term health insurance to fill in the gap. This is temporary health coverage for doctor visits, emergency room or urgent care visits, and preventive care.
What can employees do to avoid missing out on special enrollment when they have a qualifying event?
1. Keep employers abreast of upcoming life changes.
Many qualifying events are unforeseen. But others, like getting married or having a baby, can be prepared for well in advance.
Employees should keep their employer in the know about any upcoming qualifying events so both parties can discuss any new health insurance options the event might trigger. If you are in this situation, be proactive to ensure you have the time to study all of the available options.
2. Be prepared to submit documentation.
Employees may be required to prove that a qualifying event has occurred. For example, they might need to produce a marriage certificate, a divorce decree, a birth certificate or adoption papers. Failure to prepare and submit these documents can cause issues. Even if you end up not needing it, you should keep this documentation on hand so you aren't scrambling to find it at the last minute.
A qualifying event can be happy or not. Either way, employers and employees must pay close attention to the special enrollment period, in turn maximizing employees' healthcare coverage and minimizing risk.