No, an increase in marketplace premiums, including a loss of a subsidy, will not create an allowable election change event for an employee to enroll in the employer plan midyear.
As a refresher, once the plan year begins, the only way to change a pre-tax election is if the employee or dependent experiences an allowable midyear election change event (often called qualifying life events or QLEs). A key component of these rules is that a change in eligibility needs to occur. Since individuals do not lose eligibility for the marketplace plan even if costs increase, it does not create an allowable election change event to join the employer plan midyear. Instead, choosing not to re-enroll in the marketplace plan or dropping coverage midyear are both seen as voluntary drops of coverage, which will not give rise to a midyear election change.
Sometimes, there is confusion because one allowable IRS midyear election change event is if someone experiences a significant change in the cost of coverage. This event is recognized in situations where the cost of employer coverage changes, but it doesn’t apply to coverage on the marketplace. Therefore, even if the cost of a marketplace plan changes, it would not allow the individual to enroll in the group health plan.
It is also important to remember that if an employer is considered an applicable large employer (ALE) and subject to the ACA’s employer mandate, it must offer coverage to full-time employees that is considered affordable. If someone is offered affordable employer coverage, they are not eligible for a subsidy on the marketplace. Unfortunately, the current marketplace systems do not include checks and balances for affordability. An employee can attest that they were not offered affordable coverage from their employer in order to obtain a subsidy, even if affordable coverage was offered. Although that situation may be rectified in the future, it can allow an employee to receive a subsidy who is actually ineligible. The rules for family members are different, so it may be possible for a family member to receive subsidized coverage even if the employee was offered affordable coverage.
With premiums on the rise for 2026 and many individuals likely losing access to marketplace subsidies, it is important for employers to understand that while it may be unfortunate for an employee to experience these cost changes, once the plan year begins, the individual needs an allowable midyear election change event to enroll midyear. As discussed in a previous Compliance Corner FAQ, employers may have a policy that allows an employee to make an election change between the end of open enrollment and the beginning of the new plan year. Employers may find more employees reaching out to make election changes once they have determined their marketplace premiums are increasing significantly. It is important for employees to understand any internal policy regarding changes before the plan year begins and to understand what events are recognized by their cafeteria plan for midyear election change requests.