Canceling Self-Funded Health Insurance

You can decline or cancel an employer-sponsored health plan if you feel it is too expensive or does not provide you with the coverage you need. If you are in this situation, you can buy an individual or family plan on or off the Texas health insurance marketplace. If you buy from the Marketplace, you should find out if you are eligible for a subsidy on a plan. Also, you can only enroll for a marketplace plan during the open enrollment period, which is usually from November to December.

Note that your employer partially sponsors the plan your company provides, and if you choose an individual market plan, you will forfeit that benefit.

Generally, it would be best to talk to a licensed health insurance agent in Texas about your options. They can explain the effect of canceling your self-funded health plan and provide you with options after cancellation if you need them.

An employer can cancel a self-insured plan for an employee or all its employees. If it is for an employee or few employees, they just simply remove the employee from the plan. If the plan still runs, the employee can choose to continue to enjoy the health benefits. pursuant to Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA provides employees and their dependents who lose health benefits with the option of continuing to enjoy the health benefits of the program for a limited period. Eligible persons may be required to pay the entire premium for coverage.

The cancellation of the entire plan has different implications for small and large companies. Large companies cannot entirely cancel health coverage for their employees. They can only substitute the mode of providing health coverage from self-insured to fully-insured health insurance. Because they are mandated by law to provide their employees with health coverage. In the process of making the switch, the employees will be duly notified. However, small businesses have the discretion to provide their employees with health coverage. Thus, if they are canceling their self-insured health program, they can choose to provide fully-insured health coverage or not provide health coverage at all. This is unless an employee’s contract or union agreement requires them to provide health coverage.

How Do I Cancel a Self-Insured Health Insurance Plan?

Large businesses cannot cancel or terminate health insurance coverage of their employees. They can just switch the avenue through which they provide health coverage — self-insured or fully-insured. Small businesses can cancel the plan by informing their employees about the termination of the plan. In some cases, a small business can terminate a plan without notifying their employees, since they are not mandated to provide health coverage.

Employers should note that self-insured health insurance is subject to Continuation of Health Coverage (COBRA). Hence, qualified employees and their dependents can choose to remain under the company’s existing health coverage at their own cost when their employment is terminated or they experience a life changing event that would have resulted in coverage termination. COBRA can keep the person on the plan for up to 18 months. COBRA only applies if there is a company-sponsored health coverage for the person to continue receiving benefits. It does not apply where the health coverage has entirely been discontinued or terminated. Hence, if a small company decides to end its self-insured health benefits program for employees, current and former employees cannot seek to be covered under that program.

An employee can talk to the employer’s Human Resources department or the person or entity at the company that handles benefits, usually the plan administrator.

Employees should take note of the following when canceling their self-insured health insurance plan:

• You have the option of canceling your self-insured health coverage for yourself or your entire household now or at a later date. This later date could be the beginning of your new coverage. Make sure you notify the Human Resources department or your plan administrator so that your coverage terminates on the correct date.
• Check your bank statements to be sure your canceled insurance has not been charged. If you cancel your insurance, you may be eligible for reimbursement for any unused premiums.
• If you have any questions regarding canceling your self-insured health insurance and how this decision may affect your health insurance needs, speak with a licensed insurance agent in Texas.
• If you are trying to terminate your self-insured plan, you should not stop paying your monthly payments on purpose. While nonpayment will result in the termination of your coverage, it is not good practice, and it may have certain implications.

Is it Bad to Cancel a Self-Insured Health Insurance Policy?

No, it is not bad to cancel your self-insured insurance policy provided you have another health plan. However, because it is bad not to have health insurance at all. Thus, if you want to cancel your self-insured health plan or any health plan at all, you should have a replacement plan, which may be from a government-health program or a private plan. You should also know when your coverage will begin because you do not want to go without health insurance for some time.

There are drawbacks to not having health insurance. Although you do not plan to get sick, there will always be the possibility of you falling sick or getting injured, thus needing medical care. Having health insurance can safeguard you financially in a major medical emergency. Even a mild illness can be very expensive to treat. Your self-insured insurance health plan or another health plan may also offer you preventive services. You can use the services to prevent a medical issue from occurring. Preventive health care can come in immunizations, vaccinations, counseling, check-ups, and tests.

If you have to pay for every medical operation out-of-pocket because you do not have insurance, you might base your healthcare decisions on cost rather than what is best for your health. Furthermore, if you cannot meet your medical bills, you may go into medical debt, limiting your options even further.

Can I Cancel Self-Insured Health Insurance Without Penalty?

Yes. You can cancel your self-insured health plan without penalty. However, you have to ensure that you follow the right procedure by speaking to your company’s Human Resources department or the plan administrator. You can make the cancellation take effect immediately or on a future date.

Consider speaking to a licensed insurance agent in Texas before you cancel, so they can guide and advise you on the appropriate action(s) to take.

When Should I Drop Self-Insured Health Coverage?

The best time to drop your self-insured health coverage is only when you have gotten health insurance from a different source, such as:

• A plan that covers your health needs (and is affordable) more than your current self-insured plan;
• If you are eligible for Medicaid or the Children’s Health Insurance Program (CHIP); or
• If you qualify for Medicare.

Do I Get a Refund of Unused Premiums If I Cancel Self-Insured Health Insurance Coverage?

Self-insured health premiums are usually paid every month in Texas. By implication, you may not find yourself in a situation where you have unused premiums when you cancel your plan. If you paid the employee portion of the premium for the month and you leave the employment during the month, you will be allowed to maintain coverage until the end of the month, or will receive a prorated refund of the unused premium for the unused portion of the month.

How Can I Reinstate Canceled Self-Insured Health Insurance?

Contact your company’s Human Resources department or your self-insured health plan administrator to reinstate your canceled self-insured health insurance.