Fully Insured and Self-Insured by Same Employer

[Guest mydayjob]

ER sponsors fully insured plan for acquired division's employees and self-insured plans for all other employees.

Fully insured plan year ends July 31. Self insured plan year ends December 31.

Can employees in fully insured plan switch to and enroll in self-insured plan effective August 1 in connection with open enrollment in fully insured plan?

Thanks!

[leevena]

Switching between a self-funded and a fully insured plan is not unusual. However, if I understand your situation, you may need to do some leg work ahead of time.

Your question says that an employer with a self-funded plan has acquired a group (referred to as a division) that has a fully insured plan. This is telling me that there are two seperate plans for two distinct groups of employees. Beyond the paperwork to make the other plan eligible, you should review the fully insured contract with respect to required participation and enrollment levels. You could be setting up a situation that creates adverse selection for your insured plan. If this is the case, the carrier is not going to like the idea. They could do a variety of things, including, nothing, increase your costs, even cancel your coverage. This is not something you should do without significant analysis.

[Guest mydayjob]

Thanks. The issue that I'm getting stuck on is whether the employees can switch into the self-insured plan at the end of the fully-insured plan's plan year (even though it is not open enrollment period in the self-insured plan).

It seems that the only restriction would be their 125 plan, which would not permit them to voluntarily change coverage and make corresponding election changes in the middle of a plan year.

However, if the self-insured plan made the coverge for the acquired employees available as of August 1, then the addition of a new benefit option would permit them to change their elections under the 125 plan at that time.

Do you agree?

[leevena]

What is in your documents for the self-funded plan? I would read these first and see if it is addressed. You can make special arrangements like a special open enrollment period as you suggest. If the employer adds a new benefit or option, you may consider it a life event. But again, please check the documents to make sure. Look at Section 125-4 rules/regs.