Mid-Year Healthcare Plan Changes: A Guide for Businesses 2026

Under most circumstances, stability and predictability are highly sought-after when it comes to employee healthcare.

Employees deserve peace of mind with a plan that covers their healthcare needs in difficult times. For employers, predictable costs keep the plan sustainable and efficient.

However, special events sometimes require special measures. Family changes, marriage, relocations, loss of parental coverage — these are just some of the things that necessitate a careful but decisive adjustment in health insurance.

This post aims to guide you through the steps, considerations, and best practices for making healthcare changes in the middle of the plan year.

Let's get started.  

Mid-Year Plan Changes: The Basics

When it comes to employee healthcare, most of the planning normally occurs before the beginning of the plan year.

On a federal level, the Marketplace Open Enrollment period usually runs from November 1st to mid-January (around the 15th), depending on the state, the following year. That's ample time for both employers and employees to finalize their health plans.

Regulations exist to limit plan changes that can have a "ripple effect" on healthcare at large. For example, high-risk individuals buying insurance mid-year can cause adverse selection, driving up costs even for healthy participants.

But that doesn't mean employees are essentially trapped in a plan that no longer fits their needs and budget. 

That's why regulatory government agencies defined Qualifying Life Events (QLEs), which make certain individuals eligible for a Special Enrollment Period (SEP). These are life-changing events that significantly impact a person's healthcare needs and finances.

Understanding QLEs

Here are some of the recognized QLEs that can enable mid-year adjustments:

• Job loss — Losing a job for any reason, be it resignation or being laid off, is a common QLE that leads to mid-year plan changes.
• Consolidated Omnibus Budget Reconciliation Act (COBRA) expiration — The expiration of COBRA coverage also triggers an SEP as long as it wasn't canceled due to non-payment or voluntary cancellation.
• Losing coverage under a parent's plan — Turning 26 years old means you're "aging off" your parent's health plan, requiring you to get your own insurance through your job or via the Marketplace directly.
• Losing eligibility for subsidized healthcare and social insurance — Becoming ineligible for Medicaid, Medicare, or Children's Health Insurance Program (CHIP) also warrants an SEP
• Marriage — Getting married is another common QLE that triggers an SEP, which is often used for adding your spouse as a dependent or vice versa.
• Having children — Although pregnancy isn't considered a QLE, giving birth (or adopting) is grounds for an SEP, allowing you to switch to a broader plan or add a new dependent.
• Relocation — Employees who move to a new county, state, or ZIP code are required to update their health plan if the relocation directly affects their coverage options.
• Divorce — A divorce is also a recognized QLE if you or your former spouse will lose dependency and, in turn, their coverage.
• Changes in citizenship — Gaining US citizenship is a major QLE, giving you a chance to change your plan mid-year to accommodate your updated healthcare needs and options.

In addition to the QLEs above, other special circumstances also trigger SEPs that, in turn, lead to mid-year health plan changes. This includes release from incarceration, tribe membership, natural disasters, and AmeriCorps membership.

Also, keep in mind that no plan downgrades are permissible without a QLE. An SEP window, however, can be triggered if the employer initiates a significant curtailment (i.e., a substantial increase in deductibles), allowing employees to downgrade to a more practical plan.

Changing Health Plans as an Employer

Unlike employees, employers don't need to wait for a QLE to make mid-year adjustments.

Under the Employee Retirement Income Security Act (ERISA), employers are given "settlor" privileges. This essentially grants them the right to change, cancel, or amend health plans as they see fit.

Implementing changes mid-year is typically done by employers as a cost-control measure against significant premium hikes. It's also a useful strategy during a merger or whenever their carrier drops their preferred provider network.

However, employers still need to check a few regulatory and compliance-related boxes when planning mid-year changes to their employee healthcare:

• 60-Day Advanced Notice rule — As per the ACA and ERISA, any significant mid-year changes to the Summary of Benefits and Coverage (SBC) must be prefaced by a notice delivered at least 60 days in advance to all affected individuals. This may include a Summary of Material Modification (SMM), which can be sent up to 210 days after the plan year ends if there are no "material" changes to the SBC.
• Fiduciary implementation — Decisions to change health plans mid-year are a settlor function, but it's crucial to remember that the implementation of changes is fiduciary (acting in the interest of plan participants). As a rule of thumb, amend both the Summary Plan Description (SPD) and Plan Document while leaving a breadcrumb audit trail by documenting the reasons behind the mid-year plan changes.
• Contractual obligations — Although healthcare plans within a company can change, it doesn't affect existing contractual obligations with insurance carriers. For example, some employers may be tied to a policy agreement that imposes penalties for changing carriers mid-year.
• Compliance matters — If an employee has COBRA coverage, it's the employer's responsibility to prevent gaps in coverage during the transition. Under the Health Insurance Portability and Accountability Act (HIPAA), employers must also allow affected employees to modify their dependents or plan tiers.

What Kind of Changes are Allowed Mid-Year?

As we go more in-depth, it's important to discuss the mid-year health plan changes you're actually allowed to make:

• Metal level upgrades or downgrades — Employees can change the metal level (e.g., Gold, Silver, and Bronze) of their health insurance during SEPs. Employers, however, can change their employees' insurance metal levels at any time as long as they observe the legal requirements (i.e., updated SMM).
• Switching healthcare structure — Employers may choose to switch to a different health benefit model, like Individual Coverage Health Reimbursement Arrangement (ICHRA), at any time. Just remember that different types of healthcare come with specific requirements for implementation, like the 90-day notice for ICHRA and Qualified Small Employer Health Reimbursement Arrangement (QSEHRA).
• Additional waiting periods — Employers can also add waiting periods before onboarding certain employees to their employer-sponsored health plan (up to 90 days only). This extra time can help them manage costs or evaluate new employees who were hired mid-year.
• Adding new dependents — As mentioned above, having new dependents through marriage, childbirth, or adoption is a QLE that triggers an SEP. The common route for employees is to update their existing health plans to accommodate their new dependents.
• New employee classes — Employers with ICHRA should know that they can define multiple employee classes (e.g., full-time, part-time, seasonal, and salaried) with different reimbursement allowances each. While employers can't remove employee classes, they're allowed to add new classes mid-year, which is usually to accommodate newly-hired employees who don't fit any of the current classes.

Mid-Year Adjustments With ICHRA: What's Allowed?

Just remember that, under ICHRA, allowances and waiting periods can't be changed mid-year.

This can be an issue if a plan becomes unaffordable due to unforeseen circumstances like a reduction in household income or relocation.

How can an ICHRA suddenly become unaffordable during the plan year?

Under the ICHRA affordability rule in 2026, an employee's contribution to insurance premiums shouldn't exceed 9.96% of their household income.

Even if reimbursement allowances and salaries remain fixed throughout the year, an employee's household income may still decrease for qualifying reasons like divorce or their spouse's termination at work.

Of course, the issue isn't the possibility of penalties, especially since companies rely on safe harbors (e.g., W-2 wages and Federal Poverty Level or FPL) when planning for affordability. Rather, it's a matter of employee experience and satisfaction with the company's ICHRA plan.

As an employer, you need to make employees feel like their healthcare is affordable and effective — not just when the IRS is looking.

You need to remind employees that they can opt out of an unaffordable ICHRA with a QLE (e.g., divorce or relocation) mid-year on a prospective basis or before the start of the next plan year. At which point, they can claim Premium Tax Credits (PTCs) instead to help pay for a Marketplace plan.

Making Mid-Year Healthcare Changes: Step By Step

Below are the steps for making changes to healthcare plans during the plan year:

Steps for Employees

• Step 1: Confirm the QLE that can trigger the SEP. Double-check rules that apply to some QLEs, like divorce only warranting an SEP if it causes a loss of qualifying health coverage.
• Step 2: Let your HR or plan administrator know about the QLE within 30-60 days (depending on the type of event). Submit the necessary documentation to verify the QLE, such as a birth certificate, marriage certificate, or death certificate, and initiate your SEP.
• Step 3: If applicable, use your state's health exchange website to log the event, upload the required documents, and submit the right forms to report the "Life Change." If your employer has a virtual portal or benefits platform, use it and complete the steps from there.
• Step 4: With a QLE and if your ICHRA is no longer affordable, complete your employer's ICHRA waiver form. Sign and return it to your employer within the deadline (usually 30 days) to waive your reimbursement allowances moving forward.
• Step 5: Follow the formal procedures in choosing new coverage or updating your existing plan. Don't hesitate to ask your HR department or health plan administrator what to expect.

Steps for Employers

• Step 1: Ensure your planned changes will not violate rules (i.e., non-discrimination rule) or your contract terms. As a rule of thumb, conduct a fiduciary review for documenting the business reasons for the change while making it clear that you're not targeting high-risk individuals.
• Step 2: Amend your Plan Document by detailing the specific changes and getting it signed by the right officer. You should also update your SPD to communicate the changes to employees.
• Step 3: If the change affects your SBC, be sure to notify your employees at least 60 days before the planned change. This includes changes in out-of-pocket limits, copays, or deductibles.
• Step 4: A 60-day SEP is triggered only if the employer makes a significant curtailment of benefits (e.g., substantially increasing deductibles or reducing allowances) for affected employees.'
• Step 5: Offer support to all employees who will be affected by the upcoming changes. Consider virtual Q&A sessions or one-on-one consultations to streamline the entire process.

Final Words

Mid-year healthcare changes can be intimidating. But once you understand QLEs, SEPs, and specific rules like safe harbors and affordability rules, everything should start clicking into place.

Hopefully, the guide above enabled you to navigate healthcare management changes — whether you're an employer or employee.

If your plan involves switching to or updating your ICHRA, remember that you can never know too much information.

We're here to help.

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