Can You Cancel Health Insurance When It Is Not Open Enrollment?
To avoid paying the penalty come tax time, it is essential that you have a health insurance plan. Of course, the insurance will also protect you if you experience an unforeseen accident or illness that lands you in the hospital. Should you experience a life change, nevertheless, that makes it difficult to continue with your current health insurance policy, you can cancel it.
While you can cancel your health insurance at any time, you will not be able to choose a new plan outside of the open enrollment period unless you meet specific “qualifying” reasons.
How Pre-tax Plans Work
Certain health insurance companies reduce taxable income and taxes for participants who choose them from a menu during an annual enrollment period. These so-called cafeteria benefits comprise medical, dental, dependent care, and health care flexible spending accounts and life insurance. For the health insurance programs, you pay your share of the premium with pre-tax dollars, which lowers the amount on which the IRS taxes you. Even if you waive the opportunity for these benefits, the fact that you are provided a cafeteria plan subjects you to the IRS rules.
When to Make Changes
Under the IRS codes, you can change your benefits yearly only during an open enrollment period. Outside of open enrollment, the only way changes can be made is when employees are hired, when they leave the organization or if they have a “qualifying” change in their lives. In case you have a qualified reason for a change during the year, you have 30 days to make a change. If you miss the deadline, you have to wait for the yearly open enrollment. Because of these time limits to make changes, it is crucial to review your confirmation statement after enrolling every year to ensure you are in the correct plans, and all your dependents are included.
Changes Permitted Outside Open Enrollment
There are numerous “qualifying” reasons to make plan changes outside of open enrollment. They comprise changes to your legal marital status, including marriage, death of a spouse, legal separation, and divorce, or annulment. A few further reasons are changes in your dependents through birth and death or adoption, or an eligible dependent (like a young adult) losing or gaining other coverage. Additionally, if there is a move by you or your spouse; a change in your spouse’s benefits; and changes in you or your spouse’s employment status, like going part-time, quitting, or being laid-off, you will also be qualified to make changes to your plan. The change you are making should be tied to an eligible reason. For instance, moving your residence alone isn’t a reason to change medical or dental insurance plans; only if your old plans are not available in the new area would you qualify to make a health insurance change.
Changes Not Permitted Outside Open Enrollment
Parents of high school seniors often do not think during annual enrollment about whether their plan option makes sense with college approaching. If you are in Los Angeles and covered by a California plan, your child going to college in Boston or Colorado can be challenging. Nevertheless, your child going to an out-of-area college does not allow your family to change plans. Changes also are not permitted if you purchase insurance outside of your employer’s plan or your spouse’s or have a change in a dependent who is not a tax dependent, like a parent, domestic partner, or child of a domestic partner. If your plan permits it, you can add a domestic partner and the child during annual enrollments, not between.
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