When Can An Employee Terminate Health Insurance?
While there are a lot of rules and restrictions when it comes to enrolling in employee health benefits such as medical insurance, dental insurance and vision insurance, there are not as many restrictions for terminating health insurance.
EMPLOYEES CAN TERMINATE BENEFITS AT ANYTIME
An employee can willingly terminate their health insurance at anytime. If the employee is still employed with your company and wishes to end health benefits they were previously enrolled in, they can reach out to the benefit administrator to request a termination of benefits. Most insurance carriers will terminate benefits at the end of the month that the termination was requested.
As an example, if Employee Fred requests a termination of his medical insurance on September 4th, the insurance carriers would require his benefits remain active for the entire month of September. Benefits would not longer be active beginning on October 1.
A few reasons an employee may wish to terminate their group health benefits are:
- Enrolling on spouse/partner benefits
- Enrolling with Medicare
- Voluntary benefits aren’t being used
EMPLOYER PAID BENEFITS: TERMINATE IN A TIMELY MANNER
As a benefit administrator, you will need to know the rules of your carrier contract for each benefit. Depending on employer contribution levels, some carriers may require all employees remain active on the plan. This is usually only required when a benefit is paid 100% by the employer (free benefit to the employee). The most common benefit paid by the entirely by the employer is group term life. Some term life is tied to medical insurance enrollment. This means that if they want to term their medical insurance with the employer, then you can also term the employer-paid life. Standalone employer-paid term life may require that all employees, regardless of other benefit enrollment, must remain enrolled and paid by the employer.
Be sure to review your carrier requirements. If you aren’t sure of the requirements, reach out to your health insurance broker or contact the carrier directly.
TERMINATING BENEFITS FOR AN EMPLOYEE WHO LEAVES THE COMPANY
If an employee terminates employment, either voluntarily or involuntarily, they usually can continue to use their benefits for the remainder of the month depending on the termination date. Just like a voluntary termination of benefits, those who leave employment or are fired will continue to have benefits through the end of the month based on their last day worked.
For example, Employee Fred quits his job on May 3rd. He gives 2 weeks notice to his employer. Fred works his entire 2 weeks notice with his last day of work being May 17th. This means that Employee Fred will continue to have insurance through the last day of May with benefits no longer being active on June 1.
If Employee Sarah is fired on March 31st (the last day of the month in March), Sarah’s benefits will remain active through the end of that day and will no longer be active beginning the next day, April 1st.
HOT TIP: It is up to the employer to report terminations in a timely manner! All carriers have restrictions when it comes to retro-terminations (terminating in the past). Carriers want to know about terminations within 30 days of the termination date. Some do allow terminations to go backwards up to 60 days, but this isn’t a guarantee and may require approval.
If using a benefit administration software, update terminations as soon as you are aware of them. If managing benefit adds and terms manually, be sure to let your carrier or broker know as soon as possible.
WHAT TO EXPECT ON YOUR BILL FOR TERMINATIONS
Employers who purchase group health insurance usually receive one bill per carrier. This bill will include the monthly premium for every employee. You will usually see a detailed breakdown per employee and/or billing tier group, depending on your plan and carrier. Bills (also known as invoices) are cut by the carrier up to 2 weeks before the invoice due date. However this can vary greatly. It is important to remember that if an invoice is cut on the 14th of the month and you submit a termination request on the 17th, it may take up to 2 billing cycles (2 more invoices) for a credit of the terminated benefits to appear. These will usually appear on a separate line item.
HOT TIP: As the employer, you are responsible to pay the ENTIRE invoice regardless of pending adds or terms. If Employee Fred quit and you terminated his benefits but he is still showing on the invoice, we recommend you continue to pay the invoice in full. You can always reach out to the carrier to validate the termination is in their system ensuring it will be credited on the next invoice. However, always recommend to pay invoices in full and dispute charges or request corrections after it is paid.
For additional information regarding group health insurance, reach out to HR Resource, Inc. We are a team of brokers who are committed to helping businesses of all size offer benefits for their employees without the headache! HR Resource, Inc. has been serving the health insurance and life insurance needs of employers in Snohomish County and Washington state for over 20 years. If you are in need of a group health insurance quote, or are looking to change up your current offerings, reach out to HR Resource today! Even if you are currently working with an insurance broker, we would be happy to discuss your needs and help you make decisions that are best for your company and employees.