Eliminating open enrollment

[Guest FAQ]

A company has a self-insured health plan and currently allows employees to sign up at open enrollment each October. The company wants to eliminate the open enrollment period that would otherwise occur next month (and in all future years). Employees would have to sign up when they first become eligible or wait for a HIPAA special enrollment period.

Although open enrollment is not required for welfare plans, I imagine that care must be excercised when a company that allows open enrollment later eliminates it. The employer plans to inform the employees asap that there will be no further open enrollment periods.

The employer did not inform the employees that the 2003 open enrollment period would be the last open enrollment. Could there be an ERISA or other violation if some employees are shut out as a result? Employees could allege that they did not sign up last year but planned to sign up this year, perhaps arguing detrimental reliance or breach of fiduciary duty.

Thanks in advance for any thoughts.

[Guest llerner]

There has to be an oppty to drop and add dependents. Typically the carrier determines when open enrollment is permitted. Unless the employer if phasing out a plan and doesn't want any new people in it, it doesn't make much sense to me.

Employees are typically permitted to change from HMO to PPO etc. and other changes and even COBRA EEs are permitted to change plans or carriers once per year. What is the purpose of eliminating the open enrollment? Or rather, what do they hope to gain by this?

[Guest FAQ]

The plan is self-insured (with a stop loss carrier). I am not sure of the reason for eliminating open enrollment. Perhaps they have determined that they will have better claims experience if they give employees one chance to enroll, rather than allowing enrollment each year.

[GBurns]

If there is an employee contribution there has to be an Open Enrollment of some sort, if only to renew the Salary Reduction Agreement.

And, unless no change to the initially selected coverage is allowed or there is only employee only coverage, there has to be some way to add/drop dependents etc.

Why the thought that "open enrollment is not required for welfare plans"?

[Kirk Maldonado]

I'm working on a situation where the employer has advised an employee that the next open enrollment period won't occur for 24 months. I've never heard of that long of a cycle, and the brokers I've talked had the same experience.

(There are very good reasons to be skeptical of this advice that was dispensed by the employer.)

In any event, has anybody ever encountered a plan with one? Are there any regulatory prohibitions on having one?

[Guest FAQ]

Why the thought that "open enrollment is not required for welfare plans"?

There is no requirement under ERISA that employees be allowed to enter a plan on an annual basis. If they do not enroll upon initial eligibility, an employer can prevent them from enrolling at a later date, subject to the HIPAA special enrollment rights.

It is not clear at this point what kinds of changes employees who are already on the health plan will be allowed to make. However, employees who are not on the plan would only be allowed to enroll in the plan when they initially become eligible or if there is a HIPAA special enrollment right under ERISA §701(f) (e.g. new dependent).

I am confident that an employer could establish a new plan with such a rule. However, if an employer has a plan that allows employees to get on the plan on an annual basis, but revises the plan to allow enrollment only at initial eligibility (or as required by HIPAA), then my concern is that employees would not have known that they would not have another chance to enroll after they declined to enroll at the last open enrollment (or declined to enroll when first eligible).

[Sandra Pearce]

Our Health Plan (self funded) has never had an open enrollment. This was a decision we made when we were no longer able to use underwriting for late entrants. We do of course follow the rules for HIPAA Special Enrollments.

Someone electing to pay for their coverage under our Section 125 Plan has the ability to stop pre-taxing at the Section 125 Plan open enrollment (1/1) and therefore drop out of our health plan, but they do not have the ability to use the 125 Plan open enrollment as an avenue into our health plan, because the underlying health plan does not allow for entry after initial eligibility except when the HIPAA Special Enrollment provisions apply or when court order (QMCSO).