Because of the potential loss of enhanced federal subsidies, Marketplace premiums will increase in 2026. This will change financial calculations for employees and their families and generate many questions about whether employees and/or dependents can enroll in the employer’s group health plan mid-year.
Whether this enrollment can occur lies in the strict regulations under Code Section 125. These regulations create a mechanism that allows employees to pay for group health plan premiums on a pre-tax basis. These plans operate under the fundamental rule that health coverage elections—the choice to enroll or waive coverage—must be irrevocable for the duration of the plan year. An exception can only be made if a Permitted Election Change Event (or Qualifying Event) occurs.
So, can an employee and their dependents enroll in their employer’s group health plan mid-year if Marketplace premiums increase significantly in 2026?
The simple answer is no. The non-renewal of a federal subsidy or a significant increase in the Marketplace Qualified Health Plan (QHP) premium is a change in cost, not a change in eligibility or status. Because the individual or dependent retains the right to enroll in the Marketplace plan (even at a higher cost), this financial change does not trigger a permitted election change event under Code Section 125 that would allow them to enroll mid-year in the employer's group health plan.
To remain compliant with tax law, the plan must deny mid-year enrollment requests based on Marketplace cost increases alone.
Why Cost Changes Don’t Apply Here
Section 125 does allow certain mid-year election changes when the employer’s own group medical plan experiences a significant cost change.
It is important to note that this cost-change rule does not extend to the cost of other external coverage, like the ACA Marketplace. Therefore, even a dramatic increase in the cost of a Marketplace plan has no bearing on the ability to change the election for the employer's group health plan outside of its scheduled annual open enrollment.
What Employees Should Plan For
As 2026 approaches and Marketplace premiums climb, employees will understandably look for more affordable options. But even in a shifting healthcare landscape, Section 125 rules stay firm. Marketplace cost increases alone do not open the door to mid-year changes, and employers must continue to follow their plan’s election rules to remain compliant.
The best approach is preparation. Employers should communicate these rules early, and employees should review their needs and plan ahead for the next open enrollment. Clear expectations now will help reduce confusion later and ensure everyone makes informed, timely decisions about their coverage.
This blog article was co-written with Larry Grudzien, Attorney at Law.
