Employers that want to control rising health insurance costs often consider making design changes to their employee benefit plans. Typically, these plan design changes are effective at the beginning of the plan year, and communicated to employees during an open enrollment period that precedes the start of the plan year. However, depending on a number of factors, employers may also be able to make midyear changes to their plans.
Can Employers Make Changes Midyear?
Yes; however, there may be restrictions to those changes. Not all carriers allow employers to make changes midyear. Even if your carrier permits midyear changes, consider the following issues?
- What specific plans can be modified, what timing is required by carriers and what is the process for implementing changes?
- How will the changes affect the benefits of current plan participants?
- Will employees be permitted to change their benefit elections under your cafeteria plan due to the midyear design change?
What Type of Midyear Changes Should Be Considered?
The following plan design changes can be considered when an employer is looking to control rising costs:
- Increase employee cost sharing (that is, deductibles, copays and out-of-pocket maximums).
- Create a new plan design that places more financial responsibility on employees (for example, a high deductible health plan)
- Implement a wellness program that motivates employees to take steps toward improving their health and well-being.
- Implement a spousal carve-out or surcharge for spouses who are eligible for other health coverage, such as coverage through the spouse’s employer.
Can Employers Make Changes to Employee Contributions Midyear?
Yes; however, there may be restrictions to those changes. Employers should consider the following steps before increasing employee contributions:
- Review how the increase in employee contributions may impact your potential liability under the Affordable Care Act’s employer shared responsibility rules, if applicable to you.
- Analyze whether the increase in employee contributions may impact your ability to satisfy the carrier’s minimum participation requirements, if applicable to you.
- Determine whether your cafeteria plan will allow employees to change their benefit elections due to midyear contribution increase.
Can Employers Add a Waiting Period?
If your health plan does not include a waiting period before employees can participate in the plan, you may wish to consider adding this plan design feature. Keep in mind that, as a general rule, the Affordable Care Act prohibits waiting periods that exceed 90 days.
Can Employers Cancel a Health Insurance Plan Midyear?
Yes; however, there may be restrictions to those changes. If you are thinking about pursuing this avenue, consider the following:
- Confirm all termination provisions under your current plan document and insurance contract.
- Decide what formal company action is needed to terminate the plan.
- Notify employees in writing within 60 days of the plan termination.