Open Enrollment is the annual period during which a company’s employees may make modifications regarding their health insurance plans. The open enrollment date changes per company but is one year from the effective date.
For example, if a companies effective date is December 1st, it will always be December 1st. If one of your workers did not enroll in your organization’s health insurance plan (or switch to a different one) during this open enrollment period, he/she will have to wait until the following year’s time frame to sign up for a new plan, unless he/she has a qualifying life event (QLE), such as getting married or having a child.
Why Is There A Timeline For Open Enrollment?
There are several specific reasons why the annual Open Enrollment Period only lasts a certain amount of time. Here is an analysis of the four primary reasons that a timeline for this period exists.
Prevents Skewed Risk
This period was created as a way to avoid skewed risk, or “adverse selection.” With regards to health insurance, this phrase refers to the scenario where ill people register for medical coverage and healthy individuals do not. When this occurs, the level of risk that a medical plan incurs when insuring people becomes significantly skewed.
Adverse selection may often lead to higher premiums for everyone in a medical insurance plan (or market), as it generally results in a pool of individuals with healthcare costs that are higher-than-average. This increase in premiums may cause many healthy people to forgo purchasing coverage, which could lead to even higher health insurance costs, thus creating a so-called “premium spiral.”
Important Decisions To Make During This Time
The decision regarding which type of health insurance plan to purchase is one that should be taken after careful consideration of all available options — especially because this decision generally determines what type of medical coverage one has for an entire year. All of your employees must always be informed about all the important characteristics of every health plan your company offers, including premiums, deductibles, coverage details, provider network, and drug formulary (the list of prescription drugs that a plan covers, if any).
Type Of Plan Offered To Employees
Employees may often choose from many different types of plans during Open Enrollment. For example, they may select short-term or long-term plans, or plans that are either bronze, silver or gold (each one covers a different percentage of an individual’s healthcare costs). Other plans such as High Deductible Health Plans (HDHP) and Health Savings Accounts (HSAs) may also be beneficial due to their lower healthcare costs.
How The Plan Will Impact Payroll
The insurance plans your employees purchase during the Open Enrollment Period directly affect their pay. Therefore, payroll is also impacted by the decisions made during this period. For instance, if one of your workers decides to switch to a higher-cost plan, then you will have to withhold a larger amount from each paycheck. In the event that your payroll provider assists you with the process of handling employee benefits, it may be possible for you to avoid doing this.
If any of your employees miss the Open Enrollment Period, they may still have the opportunity to sign up for health insurance, as many carriers have a 30-day grace period for updating selections.
Speak To The Open Enrollment Experts
Reach out to the professionals at New City Insurance in San Diego for more information on the annual Open Enrollment Period and why your employees can benefit from acquiring insurance during this time.
At New City, we provide group health insurance plans that include dental, life, and vision insurance (both high-premium and low-premium plans). We also offer a wide variety of employee benefits, including 401k & retirement plans, benchmarking, wellness plans, and professional employer organizations (PEOs). We also provide executive benefits plans that include deferred compensation plans, asset allocation, and wealth planning. Regardless of your unique needs and budget, we are here to help.
Call New City Insurance today at (888) 210-2759 or request a consultation to learn more about our benefits offerings.