FAQ: Is This A Qualifying Event?

Q: My spouse lost his/her job and I can no longer afford my group health insurance. Can I drop my coverage through my employer?

A: Two elements are necessary in order for an employee to be eligible to make a mid-year election change to a pre-tax benefit election. First, there must be a recognized Qualifying Event (“QE”). Second, the change requested must be on account of, and correspond with, the QE. This is the consistency requirement.

The consistency requirement limits changes permitted even when there is a QE. To understand the rule, it is helpful to understand exactly what the QE is in this question. The QE is termination of the spouse’s employment that causes a loss of eligibility under the spouse’s plan. The purpose of this particular qualifying event is to allow individuals that lose coverage under a spouse’s plan the opportunity to get coverage through the employer’s plan. If the spouse lost coverage, then a consistent change is adding coverage under the employer’s plan to make up for the coverage lost. The employee dropping coverage in this situation is not consistent with the QE. While this oversimplifies the rule, generally if coverage is lost due to a QE, the rules would permit other coverage to be added, but not dropped.

Often when a family member loses a job, the employee wants to decrease coverage to save money. Unfortunately, such a change is not permitted by the rules. Financial hardship is not a QE and termination of a spouse’s employment only allows the employee to increase coverage.