When Life Changes, So Can Your Coverage: Qualifying Life Event Health Insurance Explained
Throughout our lives, many things happen to us that are out of our control. This is why we have insurance; to protect us from the risks of life, both planned and unpredictable. Although we may not be able to predict the future, we can keep ourselves informed so we can feel prepared and confident to tackle what may come.
New Hire Enrollment
When you start a new job that offers a benefit package, assuming you are eligible, you will be given the option to enroll or waive coverage. This is often referred to as the “new hire window.” During your new hire window, you will have a limited amount of time to submit your enrollment. If you do not provide your enrollment elections within this time period, you will not be enrolled in the optional benefits (some benefits may not be waived or declined). Please make note of how long you have to make your elections to ensure a smooth and timely submission.
When you receive your enrollment packet, also take note of the new hire waiting period. To ensure you have no lapse in coverage, you will want to consider enrolling on a plan through the individual insurance marketplace, or continuing your previous employer plan coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA was established to allow terminated employees to continue coverage for a limited period of time. You will want to be covered in case of an accident or other unforeseen event, and some states have penalties if you are not insured. Click Here for more information on COBRA, or reach out to our team if you have additional questions or would like assistance enrolling in the individual insurance market.
Qualifying Life Event (QLE)
Once you have made your decision, you are “locked in” until your employer’s Open Enrollment Period, unless you experience a Qualifying Life Event (QLE). QLE’s allow you to make a change outside of Open Enrollment. Open Enrollment is the time in which you can enroll yourself or dependents if previously waived or switch plans, without having to provide proof of QLE. To make changes outside of Open Enrollment, you will need to provide proof of the QLE to your employer. You will have only 30 days to report your event, so please act quickly to ensure a smooth process.
Following a QLE, you may make mid-year changes to your benefits—such as enrolling in coverage if previously waived, adding eligible dependents, or switching to a different plan (if multiple plans are available through the employer). Voluntarily dropping coverage—for example, deciding mid-year that you no longer want or cannot afford the coverage—is not considered nor does it trigger a QLE. While some insurance carriers may allow coverage to be canceled mid-year, Section 125 rules prohibit changing or revoking pre-tax premium elections without a qualifying event. In addition, if you were to cancel your employer sponsored plan without a QLE, you would not be able to enroll in other coverage such as an individual plan without said QLE and would not be covered.
Qualifying Life Event Examples:
- Marriage/divorce/separation/registration of domestic partnership
- Gaining or becoming a dependent through birth or adoption
- Involuntary loss of prior coverage through spouse, parents, Medi-Cal, etc.
- Excludes terminations due to nonpayment of premium
- Spouse enrolling in Medicare
- Return to the United States after being abroad for more than30 days
- Employer cessation of contribution towards employee or dependent coverage
- Dependent turns 26 (and is not deemed permanently/totally disabled)
- Death of covered person (self or dependent)
- Court order
- No longer living or working within the covered service area
- Return from active military duty
- Release from incarceration
Again, you will only have 30 days to report your QLE and request a change, so reach out to your HR representative as soon as possible so they have enough time to give you the materials needed for the update and submit the request timely to the carriers.
The carrier will request documentation to prove your QLE. Your HR representative will advise exactly what they need for the specific event, but commonly accepted items are:
- COBRA offer letter (must list names of dependents if they are to be enrolled)
- Letter from prior insurance carrier (must list names of dependents if they are to be enrolled)
- Marriage certificate
- Court order document
- Adoption papers
Do not submit the termination letter from your prior employer. Employer letters may mention COBRA but may not be the COBRA offer letter itself. Depending on the employer, the termination letter and COBRA offer may be bundled together, otherwise the termination letter will simply advise you will be receiving the COBRA offer in the mail soon. Carriers do not see employer letters alone as credible proof of QLE. If you are not sure, reach out to HR and they will advise. If you don’t receive a COBRA offer letter in the mail or a termination letter from the carriers, call the carriers directly and ask for a “statement of coverage” letter or simply let them know you need proof of termination.
Open Enrollment
Even if you are covered by your spouse or parent’s plan, it is important to review your company’s policies and know when Open Enrollment occurs. Open Enrollment is commonly held at the end of the calendar year, with changes effective January 1st. However, not every employer operates on a calendar year cycle. Check your employee handbook or ask HR when the Open Enrollment window is, and mark it on your calendar. Even if you are not expecting to make any changes, it’s imperative that you are informed.
Understanding the Rules Through Fictional Scenarios
Here are some examples you can review to provide additional context to how these rules can play out in real life situations. Please note these are fictional examples and any similarities to yourself or others is coincidental and entirely unintentional.
- Peter was 25 years old when he started work at ABC Firm. He preferred the insurance he had through his parents, so he waived coverage during his new hire window. Peter’s 26th birthday is July 8th– as a result he will no longer be eligible to be enrolled on their plan and his coverage will be terminated July 31st. Peter has the option to elect COBRA and join during ABC Firm’s next Open Enrollment, or he can use the QLE of aging off his parent’s plan to join ABC Firm’s offerings effective August 1st. Peter decides to join ABC Firm’s plans, and provides the COBRA offer letter that was sent to his parents notifying them of his termination.
- Arthur was enrolled on the health plan with his son, Greg. Greg is not disabled, but has many medical needs, so Arthur bought up to the Platinum tier plan to ensure his needs were covered. When Greg turned 26, he decided to continue the Platinum plan via COBRA until he found sufficient coverage elsewhere. However, Arthur uses the QLE of Greg aging off to switch to the Silver plan, as that is more cost effective for Arthur’s personal needs.
- Rose was enrolled with her spouse Jimmothy on ABC Firm’s medical plan. Rose turned 65 and enrolled in Medicare, however Jimmothy was still only 64 and was not yet eligible for Medicare. Rose cancelled their insurance through ABC Firm, and Jimmothy decided to elect COBRA to cover himself until he became eligible for Medicare.
- Tyler waived coverage during his new hire window, because he was on COBRA. He elected COBRA because his prior employer agreed to subsidize six months of premium. When the subsidy ended and he saw how much it would cost to continue without it, he reached out to HR to inquire about enrolling on ABC Firm’s plans. HR informs him that the end of the subsidy is not a qualifying event, and that he will need to wait an additional three months until Open Enrollment to enroll effective July 1st. Tyler asks if canceling his COBRA will trigger a QLE, and he is informed nonpayment of premium is also not a QLE for enrollment. Tyler decides to pay for COBRA until he can enroll during Open Enrollment.
- Betty and Joe have coverage through the Individual Insurance Marketplace. Betty has a job that offers coverage, but she waived due to personal preference towards her existing plan. Joe decides he doesn’t like the plan anymore, and stops paying for the insurance premium, hoping to trigger a qualifying event that will allow them to join the plan offered by Betty’s employer. The carrier cancels their insurance due to nonpayment. Betty attempts to enroll herself and her spouse, but is informed by her HR department that she and Joe will have to wait until Open Enrollment, because termination due to nonpayment of premium is not a qualifying event.
- Jenny waived ABC Firm’s benefit package during her new hire window, because she was covered by her spouse Steve’s employer. Steve received an offer at another firm, so he quit that job, resulting in their insurance terminating at the end of November. However, the new job has a 60 day waiting period for benefits. Since COBRA was too expensive for their budget, and Jenny’s package at ABC Firm is sufficient, Jenny takes the COBRA offer letter from Steve's employer to her HR department as proof of QLE and requests enrollment effective December 1st.
- Quinn and his wife Ella are expecting their first child. They utilize open enrollment to switch to a plan that will be more beneficial to them through Ella’s pregnancy. Ella has a healthy baby boy, and notifies HR of the birth. Ella and Quinn review the quote, and when submitting the enrollment for their newborn, they also request to move from the Platinum plan to the Gold plan, as it still provides sufficient coverage for their family but is more cost effective for them. Since most carriers don’t request proof of birth, they simply provide the insurance change forms.
- Cody waived coverage when first hired, and again during open enrollment in December. Cody does not have insurance, but thinks that he doesn’t need it as he is “perfectly healthy.” In May, Cody gets into a car accident, and needs ongoing physical therapy. The costs are quickly adding up, so he reaches out to HR because he thinks he can enroll at his discretion. HR informs him that albeit unfortunate, he cannot enroll until the next open enrollment. Cody then continues to pay for all medical expenses out of pocket.
Contact Us For More Insurance Needs
Thank you for taking the time to inform yourself of these rules and requirements. Knowledge is one of the best tools at your disposal. If you have any additional questions or concerns, please reach out to your HR department, or our team here at AEIS. We are happy to help provide you with any additional guidance.
Disclaimer: Any information related to compliance, laws and regulations, or other subject matters in this content is intended to be informational and does not constitute legal advice regarding any specific situation. The content is based on the most up-to-date information available on the date it was published and could be subject to change. Should you require further assistance or legal advice, please consult a licensed attorney.
