The world of finance and investments is notorious for its extensive use of jargon. With a goal of enhancing financial literacy and making the world of money more transparent, we have our “monthly jargon” post that focuses on debunking financial terms that are continuously used sans explanation. This month, we are addressing a term that always finds itself in the spotlight around this time of year: “open enrollment.” When we use the phrase “open enrollment,” we are referring to a designated time of year during November and December that comprises several weeks during which individuals can enroll in health insurance, make changes to their coverage, or cancel their coverage. People also use the term “annual enrollment” synonymously with “open enrollment,” so know that these two terms are interchangeable and refer to the same concept. Open enrollment periods have been a feature of employer-sponsored health insurance plans for quite some time, but this enrollment period was only applied to the individual market as of 2013.
The open enrollment period exists for individuals to compare health insurance plan options available via the health insurance marketplace – the platform of health insurance plans available to individuals, families, and businesses – and make any desired changes to their coverage with the changes taking effect the following calendar year. An important aspect of open enrollment is the stringency with which the time frame is applied. For example, unless you experience a qualifying event outside of the open enrollment dates, you must address your health insurance needs during the year’s specified enrollment period. For example, the 2020 Open Enrollment Period runs from November 1, 2019, to December 15, 2019; therefore, if you want to enroll in or change your 2020 health insurance coverage, you must do so during these dates or risk having to wait until the following year to add or change coverage.
Exceptions do occur, as there are seven states that extend their open enrollment deadlines: California, Colorado, Massachusetts, Minnesota, New York, Rhode Island, and D.C. Additionally, you can apply for a special enrollment period if you experience a triggering qualifying event, such as the birth or adoption of a child, marriage, divorce, or the loss of a job with health insurance. For states that follow the standard open enrollment period in 2019, the health insurance coverage elected by individuals in those states begins on January 1, 2020. Individuals that enroll or make changes after December 15 in the states with extended periods or at a separate time due to a qualifying event will need to verify when their coverage begins. For private health insurance coverage, an individual can cancel the plan at any time; however, this is generally not an option for employer-sponsored coverage. Furthermore, individuals are not able to add new coverage or switch to a different plan outside of the open enrollment time frame for both private and employer-sponsored coverage unless a qualifying event triggers a special enrollment period.
Remember that this marketplace open enrollment is only for health insurance and does not apply to auto, life insurance, or long-term care insurance. These three products are completely separate from the health insurance marketplace, and individuals can buy these products on their own at any time throughout the year. Additionally, this open enrollment period does not apply to Medicare; the enrollment period for Medicare is a separate time frame, and for this year, the Medicare enrollment period runs from October 15 to December 7.
Overall, the primary intention of open enrollment is for individuals to evaluate their health insurance coverage and needs; yet, take note that this time frame also doubles as a great year-end reminder to evaluate your entire financial and retirement plan to ensure all necessary pieces are in line and complement your short-term and long-term goals.