What is Open Enrollment for Group Medical Insurance Plans?

We often get asked when employees can enroll in a company’s health, dental or vision plan and why can’t they enroll at any time of the year. Many think that it is unfair that insurance companies limit the times that people can enroll, but there is good reason for this practice and this article describes the reasons.

The insurance companies limit the opportunity for people to enroll in medical, dental and vision insurance plans to the times that they are first eligible (after being hired) and once a year during the “open enrollment” period.

Insurance companies restrict enrollment to these times to prevent what is known as “adverse selection” in the insurance world.  Basically, insurance companies want to prevent people from waiting until they are sick or injured to sign up for coverage.  Insurance is based on the assumption that healthy and unhealthy people enroll.  If people could wait until that had a medical problem to enroll, then there would be little incentive for healthy people to enroll in coverage, insurance costs would skyrocket, and insurance wouldn’t work.

Put another way, if people could game the system and enroll when they got sick, have the insurance pay for medical treatment, then cancel coverage once they recover, then there would not be enough people paying into the system to cover the cost of medical treatment.

Limiting the times that people can enroll in a group health plan to specific times of the year, increases the likelihood that everyone will enroll when they have the opportunity and not wait until they get sick.

There are exceptions to enrolling only during open enrollment.  This is when a person has a qualifying life event.  If, for example, one of your employees who wants to enroll outside of the open enrollment period recently lost other insurance coverage, e.g., a spouse changed jobs and your employee’s coverage through their spouse’s prior employer was no longer effective, then the employee could enroll in the company’s insurance plans outside of the open enrollment period.

If we can be of assistance to you and your employees with your group employee benefits, please give us a call at (800) 746-0045.