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In the United States, employer-paid (or employer-subsidized) health insurance is provided as a benefit. Typically there are a range of plans available for the employee to choose from, based on their personal needs. Once a year, for a limited time period, employees are allowed to switch plans if they so desire. This period is called “open enrollment.” For the rest of the year, you have to stick with what you have. You can, however, make changes if there is a "life event" (marriage, birth of a child, etc.).

What is the purpose of open enrollment? Why can't insurance elections be made at any time?

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    to allow employers and health care providers to budget for the year and to prevent people from trying to game the system, by trying to switch back and forth between low cost and full coverage plans on a month to month basis depending on if they need any major services or not that month.
    – Dan Is Fiddling By Firelight
    Commented Apr 30, 2019 at 10:30
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    @JoeStrazzere I'm honestly not sure if the meaning of this question is obvious to a US reader (although I take it from your comment that it is). As a non US person the question is meaningless to me. I don't understand what "open enrollment" means in the context of "insurance elections" (or even what insurance elections are).
    – Player One
    Commented Apr 30, 2019 at 11:49
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    @PlayerOne Added an explanation for you lucky folks who aren’t subject to the crazy US health care system.
    – Ernest Friedman-Hill
    Commented Apr 30, 2019 at 12:20
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    @PlayerOne There are plenty of questions that are country specific. I don't think it's fair to close a question just because it doesn't relate to you. You are not "forced" to answer the question or read it if it doesn't apply to you.
    – Dan
    Commented Apr 30, 2019 at 12:23
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    Final vote to reopen. This question is perfectly clear in the context of the US healthcare system, it's about "the workplace" in the sense that it specifically addresses what is basically the most important compensation method other than salary in the US. Further, it has a clear answer, and it makes sense that people who don't understand the answer would want to know it. Perfect Workplace question.
    – dwizum
    Commented Apr 30, 2019 at 13:52

3 Answers 3

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What is the purpose of open enrollment? Why can't insurance elections be made at any time?

That is how employer provided insurance works in the United States. They don't want employees to only have insurance when they know they need it.

Insurance works because not every person has a big medical bill every month. Some months a person may have zero bills, some months small bills, and every so often they have a very large bill.

The way this is managed is by forcing person who is getting medical coverage though their employer to signup for insurance when they start with a new employer, or during open season, or after a life event such as marriage or birth of a child.

The ability to drop insurance during times when no big bills are expected is further restricted by not covering for preexisting conditions if there are time periods where there was zero coverage. So you can't drop insurance for months and then decide to buy it as you are waiting for surgery.

Of course you can turn down insurance coverage through your employer, and deal with getting insurance through the marketplace. But you may be skipping a employee benefit, and you may still have to get insurance during an open season to comply with insurance laws.

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  • Im giving this a vote because this is all true from an employee perspective.. I want to point out that the argument I have heard from Insurance companies is "It's impossible to manage risk and calculate how much to charge people if the pool of the insured is always in flux"... I severely hate health insurance companies but it is sort of a valid argument
    – Smitty
    Commented Apr 30, 2019 at 15:18
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    @Smitty: It's also very last century. In this century, everything is constantly in flux. "Batch processing" is antiquated. However, the point that this answer makes regarding gaming the system is valid. An example of this is how some people drop and activate Amazon Prime at will to take advantage of free shipping, special television shows, etc., on an ad hoc basis - thus paying for a month here or there instead of a continuous subscription.
    – Dennis Williamson
    Commented Apr 30, 2019 at 15:58
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    Solid answer, here are a couple more details: life-changing events affect marketplace enrollment in the same way as they do employer-provided plans, often including job loss. And pre-existing conditions aren't a thing like they used to be (you can try to time coverage as described in this answer, though I don't recommend it for a lot of reasons). Finally, benefit payouts aren't what you buy with an indemnification policy like health insurance-- you're buying the chance to operate at the average level of risk in a pool, rather than your individual, unknowable level of risk.
    – Upper_Case
    Commented Apr 30, 2019 at 15:59
  • @DennisWilliamson Well said and I agree.. Personally, I think we can do better as a society than to make profit from the inevitable health care costs that every person must face... The problem is that there is nothing stopping these companies from operating like its 30 years ago... In my state, it is basically Blue Cross or nothing so while I loathe their way of doing business, I dont realistically have a choice in the matter
    – Smitty
    Commented Apr 30, 2019 at 17:51
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Insurance companies survive by taking the cost of what they pay out and spreading it among the people that buy it. The medical costs you bill to the insurance company will affect the rates you pay next year. That's just how it works.

In addition to that, an insurance company will negotiate contracts with providers -- hospitals, doctors, etc. A large insurance company will be able to give a substantial discount to see a doctor that is "in network". They may or may not cover certain procedures or medicines, based on the contract the consumer elects to sign up for. If your insurance doesn't cover something, chances are it's because your boss chose not to include it in the contract. Not because the insurance company wants to kill you. You COULD likely buy a plan that covers everything imaginable, but it costs more money -- because it would cost the insurance company more to issue the policy.

To do that, they need a set time frame. Every year the doctor may elect to participate, or not. The customer may elect to participate, or not. And due to changes in enrollment, or in provider participation, and provider costs in this contract, your costs may go up. But they have to have a baseline time in order to figure this.

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Unfortunately in America insurance scam is somewhat common. Many insurance policies from auto, home, health, and collectables have "waiting" periods before they go into effect. Health insurance is slightly different as most employers will insure right away from the first pay check but sometimes they too have probation periods. I have seen cases where new hires are given health insurance after 90 days, especially in minimum wage, high turn over situations where someone comes in, gets hired, gets the medical treatment, then quits.

Even in one case I saw a person not having life insurance and they knew they had a terminal condition. So they hired into a position, bought the premium life insurance, etc., then the person passed away a few months later and all the benefits paid out to the family.

So the open enrollment is more to protect the company. Insurance is built upon people who do not use it, if you think about it. It's like auto insurance or home insurance. You're paying into it based on your area, how many claims were made, how many people are insured drivers, and general disaster areas. So the more people who do not use the insurance, the cheaper the premium is to you. If a lot of people are using insurance, or making claims, then the rates are higher. Health insurance costs an employer a lot of money as they share some of the burden of the payment. With that said, if they can "lock you in" to the rate for a year, and hope you don't use it as often.

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