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Small Business Employee Benefits and HR Blog

Options for Switching Individual Health Insurance Plans

As of 2014, guaranteed-issue individual health insurance plans are available for the first time in the United States. Over 7 million people signed up for plans under the first ACA open enrollment period ending March 31, 2014. Now that the open enrollment has closed for this year, what options are there for those who have enrolled in a plan and would like to make changes?

Here’s what employees and clients need to know about options for switching individual plans outside of the annual open enrollment periods.

Options for Switching Health Insurance Plans

Can You Change or Switch Plans at Any Time?

Not necessarily. Plans can be canceled at any time; however, now that open enrollment is closed, existing plans cannot be changed or replace except during scheduled open enrollment periods or special open enrollment periods created by a qualifying event.

Can You Cancel an Individual Health Plan at Any Time?

Yes. Even though individual health plans usually cannot be replaced or changed outside of open enrollment periods, they can be canceled at any time. However, it is important to remember that because of the ACA’s individual mandate, most individuals will be assessed an individual shared responsibility fee tax if they go without minimum coverage for three months. The fee is paid at tax time, and is $95 or 1% of household income, whichever is greater.

When is Open Enrollment?

Individuals can cancel their current plan and replace it with a new plan during the yearly open enrollment periods. Open enrollment periods occur at the end of each year for plans starting the following year. The next open enrollment period, for 2015 plans, will begin on November 15, 2014 and end on February 15, 2015.

What are Special Enrollment Periods?

Individuals may be able to replace their current individual health insurance plans outside of open enrollment if they have an event that qualifies them for a special enrollment period. These periods typically last 60 days and give a person the ability to purchase a new plan. Example qualifying events include:

  • An individual or dependent loses minimum essential coverage.

  • An individual gains a dependent or becomes a dependent through marriage, birth, adoption or placement for adoption.

  • An individual, who was not previously a citizen, national, or lawfully present individual gains such status.

See all of the qualifying life events here.

Are There Any Other Options?

If a plan is canceled and an individual cannot afford to replace it or the individual is unable to afford their current plan, they can apply for a hardship exemption which may qualify them for lower-cost catastrophic plans, or for the individual mandate to be waived.

Business owners with a group health insurance plan, who are considering ways to reduce the cost of providing health insurance to their employees, should recognize that under these rules they can create a special enrollment period for their employees by canceling their group plan.This would allow them to implement a Section 105 Medical Reimbursement Plan to reimburse their employees for purchasing individual plans.

Small Business Guide to Section 105 Medical Reimbursement Plans