Summary: A qualifying life event lets you update your health insurance plan outside open enrollment. This guide breaks down what counts, how it affects benefits like FSAs and HSAs, and what employers need to handle quickly and compliantly.
A qualifying life event (QLE) is a major change in a person’s life situation that can have a major impact on their health insurance situation as well as other parts of their life.
Examples include marriage, the birth of a child, or reaching the age of retirement. These events generally affect the person’s finances significantly and are therefore defined by the Internal Revenue Service (IRS) in the US.
Because QLEs are so significant, they can affect insurance needs and rates and generally entitle policyholders to make changes. QLEs can be surprising changes or intentional, but either way, their impact is substantial.
Qualifying life events are especially important when it comes to health insurance. Under normal circumstances, there is an open enrollment period (OEP) for health insurance each year. This is an annual period within which people are able to enroll in or change benefits, and usually occurs in October and November. This period is set to make insurance fair for insurers. If people could sign up for insurance at any time, they could wait until they were sick or involved in accidents to sign up. This would take chance out of the equation, and insurance companies would only pay out and quickly go bankrupt.
However, it would also be unfair for people to be trapped in insurance plans all year or not be able to get insurance for a year if their circumstances change. This is the rationale behind QLEs. They generally give people special enrollment periods (SEPs) of between 30 and 60 days to make changes to their insurance or enroll in new plans, depending on their plan types.
For health insurance plans sponsored by employers, employees should report life changes to their employers quickly when they happen. In some cases, for example, the birth of a child or a move to a different state, they may even be able to report changes in advance. They typically also need to provide documentation to verify their changes, including things like birth certificates, divorce papers, or death certificates. Employers are then responsible for accommodating their employees’ QLEs by helping them fill out forms to report them to insurers. If they mishandle, QLE reporting, employers can be penalized. For plans that aren’t employer-sponsored, plan holders need to register QLEs themselves with their insurance providers.
What Else Do Qualifying Life Events Affect?
While QLEs are most commonly tied to private health insurance changes, they can also have significant effects on other types of plans and even personal income taxes. QLEs can affect the following:
Medicare
If you’re covered by Medicare because you’re over 65 or younger with a disability, a qualifying life event can entitle you to a 60-day SEP. During this time, you may be able to enroll in a different Medicare Advantage plan or return to Original Medicare if you had a Medicare Advantage (Medicare Part C) plan. You can also switch to a different Medicare drug plan. Turning 65 is also the most significant QLE, which entitles most people to sign up for Medicare for the first time.
Medicaid
If you are covered by Medicaid because you have limited income and resources, a qualifying life event can entitle you to a SEP in which you enroll in a plan.
Some QLEs, however, can make you lose eligibility for Medicaid, for example, a marriage with increases your assets. However, losing Medicaid coverage can entitle you to a SEP for private insurance plans.
Flexible Spending Accounts (FSAs)
If you have an FSA, you normally can’t make changes to your election amount (the amount you contribute for the year) during the plan year. However, if you experience a QLE or one of your dependents does, this may entitle you to a SEP, which will generally start on the first pay period after your QLE is approved.
Health Savings Accounts (HSAs)
As with FSAs, qualifying life events can also affect HSAs. When they happen and are approved, they can entitle HSA holders to SEPs during which they can adjust their contribution amounts based on any changes made to their health insurance coverage. QLEs may also require HAS holders to prorate their contributions if they happen mid-year.
Taxes
In addition to health insurance and savings plans, QLEs can also have major effects on your personal income tax obligations. These changes may require you to update your withholding amounts with your employer (using a Form W-4).
Adding new dependents (ex., adoption or birth of a child), filing jointly because you’ve gotten married, buying a home, and other QLEs can significantly increase your deductions and decrease the amount of taxes you owe.
Different Types of Qualifying Life Events
The IRS defines a large number of significant life events as qualifying for updates and changes to insurance plans. These events can be grouped into four broad categories:
Family Changes
A change in the composition of your family and dependents can be considered a QLE. Examples include:
- Marriage
- Separation
- Divorce
- Domestic partnership changes
- Birth of a child
- Adoption of a child
- Death of a dependent
Health Coverage Changes
Losing or gaining other health insurance coverage can usually qualify you for a special enrollment period. Health coverage QLEs include:
- Turning 26 and losing coverage on a parent’s health insurance plan
- Becoming ineligible for Medicaid
- Becoming eligible for Medicare (usually by turning 65)
- Losing employer contributions toward coverage
- Losing student-based coverage
- Coming to the end of your COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage
Residence Changes
If you change your residence, you may qualify for an SEP. Triggering changes can include events like:
- Moving to the US from a foreign country or a US territory
- Moving to a different county or zip code
- Moving to or from school (for students)
- Moving into or out of a shelter
Status Changes
Other changes can affect your employment, residency, citizenship, or other status. Common qualifying life events include:
- Becoming a US citizen or a legal resident
- Being released from incarceration
- Becoming a member of a recognized Native American tribe
- Gaining or losing employment
- Being discharged from the military
- Becoming disabled
How to Report Qualifying Life Events
Qualifying events are normally listed in insurance policies or can be provided by plan administrators, like employers. Insured people should check their insurance documents to confirm that their life changes count as QLEs. If they do, they should report them promptly, normally within 30-90 days of when they occur.
Employees with employer-sponsored plans should report to their employers, while self-employed people can report directly to their insurance providers. This normally involves filling out a QLE reporting form and providing documentation to prove the life event.
Reported QLEs are promptly reviewed. If approved, insurance providers normally provide clear instructions on the length of the special enrollment periods and changes allowed. Policyholders should review their options and make their changes quickly to ensure they don’t exceed their SEPs.
Qualifying Life Events for Insurance
When life changes dramatically, people can lose their health insurance coverage or need to make major changes to their policies.
The IRS defines several major changes as qualifying life events that entitle people to special enrollment periods, short windows that let them make changes or enroll in new insurance plans.
This way, major life changes don’t put people in danger of going without health insurance or paying more than they can afford for coverage.
Frequently Asked Questions
It can be if you are a child listed as a dependent on your parents’ health insurance policy. When you turn 26, you can no longer be a dependent on a parent’s plan and must find health insurance of your own.
QLEs need to be reported within a reasonable amount of time, which is usually 30-90 days, depending on the insurance plan. If employees don’t report their QLEs correctly during this time, they can lose the entitlement to make changes to their plans and will need to wait for the annual open enrollment period. However, if a delay happens through the fault of their employer, employees may be able to take legal action against them. The employer can also be fined for being in breach of the Affordable Care Act (ACA).
Authors:
Charlotte is an Human Resources Information Systems and Martech expect, Charlotte has worked for major brands in the industry including FactorialHR and Tooltester. Originally from Manchester, UK, with a Bachelor's degree from the Manchester Metropolitan University, Charlotte currently lives in Barcelona, Spain.