As COVID-19 swept the globe and the country, it put stress on all types of supply chains and industries. It has also put stress on the financial and health situations of many Americans.
If you’re looking back to whenever your last healthcare benefits enrollment period was and grimacing at the choices you made, you’re in luck—you might have the chance to change them. In addition to extending the tax deadline for 2020, the IRS has issued a rule modification in light of the pandemic that might allow you to change your elections mid-year instead of waiting for the next open enrollment period.
Find out more about these changes and what they might mean for you here.
- You may be able to switch to a different healthcare plan if your employer allows it.
- You may be able to drop employer-sponsored coverage if your employer allows it.
- You may be able to change contributions to a flexible spending account (FSA) if your employer allows it.
- Employers may voluntarily extend the grace period for using 2019 FSA funds.
A Potential Mid-Year Open-Enrollment Period
The IRS rule change allows mid-year enrollment in a different plan that your employer offers. This means employees may be able to make new elections to better use their income and protect themselves against healthcare expenses.
However, employers are being given the choice of whether they want to offer these options. The answers to the questions below all depend on whether your employer elects to allow changes.
Can I drop my healthcare insurance altogether?
Yes, you can elect to end healthcare insurance coverage through your employer. The caveat is that you must replace that coverage with a qualifying plan through the health insurance marketplace, a spouse’s benefits or another option.
Can I switch healthcare plans?
If the employer allows it, yes, you can switch healthcare plans outside of the normal open enrollment. This is true even for people who have not had a qualifying event such as a job loss or a change in marital status.
Can I get health insurance if I didn’t have it before?
Yes, if your employer allows an open enrollment period mid-year, you can elect benefits even if you previously declined them. This allows more people to get insurance that they may now want or need in light of the pandemic.
If I change plans, will I lose what I’ve paid toward my out-of-pocket deductible?
It’s probable that changing plans will reset all benefits-related counters. That includes deductibles and out-of-pocket expenses. If you’re considering making a change, weigh how much you’ve already contributed toward your deductible and out-of-pocket maximum. In some cases, it might be more financially beneficial to stick with the plan you have if you’re close to or have already met your maximum.
Changes to FSAs
The IRS also provides a rule change that addresses flexible spending accounts. Again, these changes are dependent upon the employer choosing to participate.
If the employer does choose to participate, employees can make mid-year changes to their FSA elections. For example, you might have elected not to fund an FSA or to fund it very minimally. But in light of the health crisis, you may now want to put more money into your account to cover medical expenses. You may be able to do so.
Alternatively, perhaps your spouse lost his or her job due to COVID-19, and you’d previously elected to fund your FSA with a large amount. You might now need that money to pay for non-FSA-approved expenses. You may be able to elect to reduce your contributions.
Changes to Dependent Care Assistance Programs
The same rule change applies to section 125 cafeteria plans used to help cover the cost of childcare programs. If your employer allows it, you can elect to increase or decrease the contributions you’re making to these programs.
For example, you might have previously elected to contribute enough money to pay for your children’s daycare expenses. This allows you to pay those costs with pretax dollars.
However, during the pandemic, your daycare might have closed, leaving your kids at home with you. Those contributed dollars are going nowhere and you risk losing them. If your employer allows it, you can change your contribution to stop adding money into your cafeteria plan. You can then use those funds to cover expenses related to your children being home.
Healthcare Coverage for COVID-19
The Coronavirus Aid, Relief and Economic Security Act instituted some exemptions to help ensure high-deductible plans and other insurance plans covered more services related to COVID-19. For example, the plan includes a specific exemption for telehealth services to help allow insurance providers to cover necessary telehealth treatments and appointments.
The IRS rule change allows those exemptions to be applied retroactively up to January 1, 2020. That means if you sought telehealth or other COVID-19-related care in the past months, you may be able to have those claims adjudicated by your insurance plan at this time.
Reach Out to Your Employer’s Benefits Office
Understanding benefits and how they can impact your entire financial life can be difficult. Start by reaching out to your employer’s HR or benefits office to understand whether they’re going to offer the option for mid-year elections and whether they can provide information about how the options work.
Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.
Born and raised in Salt Lake City, John Heath earned his BA from the University of Utah and his Juris Doctor from Ohio Northern University. John has been the Directing Attorney of Lexington Law Firm since 2004. The firm focuses primarily on consumer credit report repair, but also practices family law, criminal law, general consumer litigation and collection defense on behalf of consumer debtors. John is admitted to practice law in Utah, Colorado, Washington D. C., Georgia, Texas and New York.
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