Health Insurance - Can I Shop Around?

[froggman2k]

Colorado - I am currently employed by a company that offers a health insurance plan. I enrolled myself in this plan when I started there 5 months ago on the 2nd day of employment without the opportunity to look through the documents regarding the coverage. After several tries in actually using the insurance, I have come to find out that the coverage is no where near adequate, and yet I'm paying a very high premium to have myself and my family enrolled. I have searched, and found a much more desirable plan, which is $50 per month cheaper, and contacted my HR department to find out how to unenroll. They told me that I cannot unenroll unless I get coverage that was unavailable to me before. Basically, they are saying that I don't have the option of "shopping" for better health insurance, and that unless I quit my job I cannot go with another company. They say this is a Federal law, yet I clearly remember a previous employer telling me that if I provided proof of insurance with another company, then they could release my coverage with them. HELP! Do I have options or am I stuck with the insurance provided by my employer at the ridiculously high rate with ridiculously low benefits?

 

[cbg]

If your employer is currently under a 125 plan (and a great many companies are) then they are partially correct. In that case, Federal law says that you cannot unenroll unless there is either a qualifying event (in this case, that would most likely mean having access to insurance through your spouse) OR until the next open enrollment period (that's the part they left out, forgot, or didn't know). Your finding cheaper health insurance would NOT be a qualifying event under the law so you would not be able to unenroll until the next open enrollment. That will be at the plan renewal date (obviously I have no idea when that will be).

If your former employer was willing to release you from coverage, then EITHER they did not know the law OR they were not under a 125 plan.

How to tell if you are on a 125 plan? If your share of the premium is taken out pre-tax or if you have the option of having it taken out pre-tax, then it is a 125 and you are stuck with the insurance you have until the next open enrollment (whenever that may be). If your portion of the premium is taken out post tax and there is NO option to take it pre-tax, then it is not a 125 plan and your employer can release you from coverage IF your plan document permits it. It IS possible, even if no 125 exists, that the contract with the insurance carrier states that you cannot drop the coverage except at open enrollment and in that case you're just as stuck. Just because Federal law doesn't forbid it when no 125 plan exists, doesn't mean that it can't be forbidden contractually. You'll need to read the plan document for that.

(If your employer pays 100% of the premium, you'll have to ask them if a 125 plan is involved because you won't be able to tell.)

The bottom line is that it's entirely possible that both your current employer and your former employer are correct. I will tell you, and I am speaking from over 20 years experience in administrating group health insurance plans, that a plan such as you describe your former employer offering is most unusual. It is not illegal, as long as no 125 is involved, but very few plans permit you to drop mid-year unless there is a qualifying event, whether by 125 or by contract.

 

[froggman2k]

Re: Shopping

Thank you for the information, and for the quick response.

Okay, so then this is my understanding: I do pay my premium pre-tax, so that is fine that I have to wait until the next enrollment period. At the time of the enrollment period, can I choose to not enroll without a "life change" or "change in status"? At the open enrollment, can I refuse coverage and at that point choose my own health provider? I understand that until that point, I will have to be covered because of the plan that my employer provides, but they are telling me that unless I quit, even at open enrollment I cannot elect to drop my benefits with them. Is this also true?

 

[cbg]

No, that is not true. Nothing in the law prohibits you dropping coverage at open enrollment. As far as the Section 125 is concerned, at open enrollment you can drop coverage with or without a life change.

I can't speak for what's in their insurance contract, however. Some companies (particularly small ones) have a "100% enrollment" clause in their policies meaning that the insurance carrier wants to be sure they have all the employees covered. This is a protection against an employee refusing coverage UNTIL they have a major claim (cancer, motorcycle accident) and only picking up the coverage then. Generally "spousal waivers" (meaning that your coverage is provided through your spouse's employer) are excluded but I'd have to look into your situation.

I think, but am not positive, that refusing to allow you to drop coverage at open enrollment MIGHT be an ERISA violation. Let me talk to my ERISA expert and get back to you this afternoon.

A word about life changes, or qualifying events (two phrases meaning the same thing). The qualifying event has to be related to the insurance action. For example, if you got married and were going to go on your spouse's insurance, then you could drop your current plan (or, you could add your spouse to your plan if you wanted to do it that way) since you both now have access to new coverage you didn't have before. However, if you have a new baby, (which is also a qualifying event) the only action you could take would be to add the baby to the plan. You could not drop coverage as the baby does not provide you with any new coverage.

 

[cbg]

My ERISA expert believes that an employer is required to allow both opt in and opt outs during open enrollments (which are required annually) but she can't point to the specific law that says so. She suggests that you contact your state insurance commissioner.

 

[froggman2k]

Wow, that's really great information. It confirms what I thought I was reading on a couple of different websites about insurance law, and I really appreciate your time and input in the situation. It's cool to know that people like you are out there providing assistance for "lay-men" like me regarding the laws and their protections.



I will be talking to my HR department on Monday. If I have any other questions, I will post them here.

Thank you again!

 

[cbg]

Let me know how it comes out - I'll be interested to know what your state insurance commission says.