By: HUB’s EB Compliance Team

Open enrollment for health insurance coverage through the Health Insurance Marketplace (also referred to as, the “exchange”) began on November 1. Since 2020, the federal government has expanded the availability of subsidies and increased the amounts people could receive. As a result, more people have been eligible for subsidies, and the subsidies themselves have been greater, resulting in lower-cost coverage. These expanded subsidies are ending on December 31, 2025.

As subsidies shrink or disappear, many people are seeing their exchange premiums increase dramatically—sometimes by significant amounts. Employers should understand how these changes may lead to questions regarding their own group plans.

Cafeteria Plans Rules

As HUB has written about multiple times, participant benefit elections are generally irrevocable for the next 12 months. This effectively means that once an election is made, it cannot be changed until the next open enrollment period. Elections also include non-elections, such as if an employee takes no action at open enrollment.

The exception to this rule is when the employee experiences a qualifying event (sometimes referred to as a qualifying life event, or “QLE”) as defined by the plan. Qualifying events are specific events that allow individuals to make changes to their existing elections outside of open enrollment. Examples of qualifying events include changes in marital status, and changes in employment status.

Limitations of Qualifying Events

The qualifying event rules are quite complex, and they don’t always apply to certain situations that employees may think they apply to. Many of these non-applicable situations may relate to exchange coverage, and the effects of reduced and eliminated subsidies. Below are several examples that are not qualifying events:

  • An employee (or spouse or eligible dependent) whose subsidy is reduced or eliminated.
  • An employee (or spouse or eligible dependent) whose individual market premiums significantly increase (whether or not the increase relates to a subsidy).
  • An employee (or spouse or eligible dependent) who chooses not to renew or enroll in an individual policy.
  • An employee (or spouse or eligible dependent) whose individual policy is canceled for non-payment of premiums.

These events highlight a few important takeaways. First, certain changes to group health plans may be qualifying events, but if those same changes occur in the individual market, they typically are not qualifying events. As an example, if an employer increases premiums during the plan year, it may be a qualifying event. However, an increase in premiums in the individual market does not yield the same result.

Second, it can be difficult to manufacture or create a qualifying event through action or inaction. For example, choosing to not enroll in an individual policy is not comparable to losing eligibility (such as through termination of employment or a reduction of hours) for an employer sponsored plan. Similarly, cancellation of individual market coverage due to non-payment of premiums also does not create a qualifying event.

A One-Way Street

The cafeteria plan rules do allow for election changes if an employee (or spouse or eligible dependent) who is currently enrolled in employer sponsored coverage seeks to change their election in order to enroll in exchange coverage. This, however, is a one-way street which allows individuals to move to exchange coverage. It does not allow individuals to move from exchange coverage onto group plans. Some may find this surprising, especially as they may have used this event to move to the exchange in the first place.

Conclusion

The changes to subsidies are likely to lead to employees seeking to enroll in employer sponsored plans. In preparation, employers should understand how these rules work and relate to their plans. They should also recognize that once the plan year begins, exceptions cannot be made without creating risks for the plan, and the plan fiduciaries.

If you have any questions, please contact your HUB Adviser. View more compliance articles in our Compliance Directory. 

NOTICE OF DISCLAIMER 

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.