diff --git a/cmd/kube-apiserver/app/testing/testserver.go b/cmd/kube-apiserver/app/testing/testserver.go
index 5a0952115d6..2e52f23b871 100644
--- a/cmd/kube-apiserver/app/testing/testserver.go
+++ b/cmd/kube-apiserver/app/testing/testserver.go
@@ -80,6 +80,7 @@ type TestServer struct {
 
 // Logger allows t.Testing and b.Testing to be passed to StartTestServer and StartTestServerOrDie
 type Logger interface {
+	Helper()
 	Errorf(format string, args ...interface{})
 	Fatalf(format string, args ...interface{})
 	Logf(format string, args ...interface{})
diff --git a/staging/src/k8s.io/apiserver/pkg/server/options/encryptionconfig/config.go b/staging/src/k8s.io/apiserver/pkg/server/options/encryptionconfig/config.go
index af750674200..c91d2f94d00 100644
--- a/staging/src/k8s.io/apiserver/pkg/server/options/encryptionconfig/config.go
+++ b/staging/src/k8s.io/apiserver/pkg/server/options/encryptionconfig/config.go
@@ -82,57 +82,91 @@ type kmsv2PluginProbe struct {
 	l            *sync.Mutex
 }
 
+type kmsHealthChecker []healthz.HealthChecker
+
+func (k kmsHealthChecker) Name() string {
+	return "kms-providers"
+}
+
+func (k kmsHealthChecker) Check(req *http.Request) error {
+	var errs []error
+
+	for i := range k {
+		checker := k[i]
+		if err := checker.Check(req); err != nil {
+			errs = append(errs, fmt.Errorf("%s: %w", checker.Name(), err))
+		}
+	}
+
+	return utilerrors.Reduce(utilerrors.NewAggregate(errs))
+}
+
 func (h *kmsPluginProbe) toHealthzCheck(idx int) healthz.HealthChecker {
 	return healthz.NamedCheck(fmt.Sprintf("kms-provider-%d", idx), func(r *http.Request) error {
 		return h.check()
 	})
 }
 
-func (p *kmsv2PluginProbe) toHealthzCheck(idx int) healthz.HealthChecker {
+func (h *kmsv2PluginProbe) toHealthzCheck(idx int) healthz.HealthChecker {
 	return healthz.NamedCheck(fmt.Sprintf("kms-provider-%d", idx), func(r *http.Request) error {
-		return p.check(r.Context())
+		return h.check(r.Context())
 	})
 }
 
-func LoadEncryptionConfig(filepath string, stopCh <-chan struct{}) (map[schema.GroupResource]value.Transformer, []healthz.HealthChecker, error) {
+// LoadEncryptionConfig parses and validates the encryption config specified by filepath.
+// It may launch multiple go routines whose lifecycle is controlled by stopCh.
+// If reload is true, or KMS v2 plugins are used with no KMS v1 plugins, the returned slice of health checkers will always be of length 1.
+func LoadEncryptionConfig(filepath string, reload bool, stopCh <-chan struct{}) (map[schema.GroupResource]value.Transformer, []healthz.HealthChecker, error) {
 	config, err := loadConfig(filepath)
 	if err != nil {
-		return nil, nil, fmt.Errorf("error while parsing file: %v", err)
+		return nil, nil, fmt.Errorf("error while parsing file: %w", err)
 	}
 
-	return getTransformerOverridesAndKMSPluginHealthzCheckers(config, stopCh)
+	transformers, kmsHealthChecks, kmsUsed, err := getTransformerOverridesAndKMSPluginHealthzCheckers(config, stopCh)
+	if err != nil {
+		return nil, nil, fmt.Errorf("error while building transformers: %w", err)
+	}
+
+	if reload || (kmsUsed.v2Used && !kmsUsed.v1Used) {
+		kmsHealthChecks = []healthz.HealthChecker{kmsHealthChecker(kmsHealthChecks)}
+	}
+
+	return transformers, kmsHealthChecks, nil
 }
 
-func getTransformerOverridesAndKMSPluginHealthzCheckers(config *apiserverconfig.EncryptionConfiguration, stopCh <-chan struct{}) (map[schema.GroupResource]value.Transformer, []healthz.HealthChecker, error) {
+func getTransformerOverridesAndKMSPluginHealthzCheckers(config *apiserverconfig.EncryptionConfiguration, stopCh <-chan struct{}) (map[schema.GroupResource]value.Transformer, []healthz.HealthChecker, *kmsState, error) {
 	var kmsHealthChecks []healthz.HealthChecker
-	transformers, probes, err := getTransformerOverridesAndKMSPluginProbes(config, stopCh)
+	transformers, probes, kmsUsed, err := getTransformerOverridesAndKMSPluginProbes(config, stopCh)
 	if err != nil {
-		return nil, nil, err
+		return nil, nil, nil, err
 	}
 	for i := range probes {
 		probe := probes[i]
 		kmsHealthChecks = append(kmsHealthChecks, probe.toHealthzCheck(i))
 	}
 
-	return transformers, kmsHealthChecks, nil
+	return transformers, kmsHealthChecks, kmsUsed, nil
 }
 
 type healthChecker interface {
 	toHealthzCheck(idx int) healthz.HealthChecker
 }
 
-func getTransformerOverridesAndKMSPluginProbes(config *apiserverconfig.EncryptionConfiguration, stopCh <-chan struct{}) (map[schema.GroupResource]value.Transformer, []healthChecker, error) {
+func getTransformerOverridesAndKMSPluginProbes(config *apiserverconfig.EncryptionConfiguration, stopCh <-chan struct{}) (map[schema.GroupResource]value.Transformer, []healthChecker, *kmsState, error) {
 	resourceToPrefixTransformer := map[schema.GroupResource][]value.PrefixTransformer{}
 	var probes []healthChecker
+	var kmsUsed kmsState
 
 	// For each entry in the configuration
 	for _, resourceConfig := range config.Resources {
 		resourceConfig := resourceConfig
 
-		transformers, p, err := prefixTransformersAndProbes(resourceConfig, stopCh)
+		transformers, p, used, err := prefixTransformersAndProbes(resourceConfig, stopCh)
 		if err != nil {
-			return nil, nil, err
+			return nil, nil, nil, err
 		}
+		kmsUsed.v1Used = kmsUsed.v1Used || used.v1Used
+		kmsUsed.v2Used = kmsUsed.v2Used || used.v2Used
 
 		// For each resource, create a list of providers to use
 		for _, resource := range resourceConfig.Resources {
@@ -152,7 +186,7 @@ func getTransformerOverridesAndKMSPluginProbes(config *apiserverconfig.Encryptio
 		transformers[gr] = value.NewPrefixTransformers(fmt.Errorf("no matching prefix found"), transList...)
 	}
 
-	return transformers, probes, nil
+	return transformers, probes, &kmsUsed, nil
 }
 
 // check encrypts and decrypts test data against KMS-Plugin's gRPC endpoint.
@@ -168,13 +202,13 @@ func (h *kmsPluginProbe) check() error {
 	if err != nil {
 		h.lastResponse = &kmsPluginHealthzResponse{err: err, received: time.Now()}
 		h.ttl = kmsPluginHealthzNegativeTTL
-		return fmt.Errorf("failed to perform encrypt section of the healthz check for KMS Provider %s, error: %v", h.name, err)
+		return fmt.Errorf("failed to perform encrypt section of the healthz check for KMS Provider %s, error: %w", h.name, err)
 	}
 
 	if _, err := h.service.Decrypt(p); err != nil {
 		h.lastResponse = &kmsPluginHealthzResponse{err: err, received: time.Now()}
 		h.ttl = kmsPluginHealthzNegativeTTL
-		return fmt.Errorf("failed to perform decrypt section of the healthz check for KMS Provider %s, error: %v", h.name, err)
+		return fmt.Errorf("failed to perform decrypt section of the healthz check for KMS Provider %s, error: %w", h.name, err)
 	}
 
 	h.lastResponse = &kmsPluginHealthzResponse{err: nil, received: time.Now()}
@@ -195,7 +229,7 @@ func (h *kmsv2PluginProbe) check(ctx context.Context) error {
 	if err != nil {
 		h.lastResponse = &kmsPluginHealthzResponse{err: err, received: time.Now()}
 		h.ttl = kmsPluginHealthzNegativeTTL
-		return fmt.Errorf("failed to perform status section of the healthz check for KMS Provider %s, error: %v", h.name, err)
+		return fmt.Errorf("failed to perform status section of the healthz check for KMS Provider %s, error: %w", h.name, err)
 	}
 
 	if err := isKMSv2ProviderHealthy(h.name, p); err != nil {
@@ -223,7 +257,7 @@ func isKMSv2ProviderHealthy(name string, response *envelopekmsv2.StatusResponse)
 	}
 
 	if err := utilerrors.Reduce(utilerrors.NewAggregate(errs)); err != nil {
-		return fmt.Errorf("kmsv2 Provider %s is not healthy, error: %v", name, err)
+		return fmt.Errorf("kmsv2 Provider %s is not healthy, error: %w", name, err)
 	}
 	return nil
 }
@@ -231,13 +265,13 @@ func isKMSv2ProviderHealthy(name string, response *envelopekmsv2.StatusResponse)
 func loadConfig(filepath string) (*apiserverconfig.EncryptionConfiguration, error) {
 	f, err := os.Open(filepath)
 	if err != nil {
-		return nil, fmt.Errorf("error opening encryption provider configuration file %q: %v", filepath, err)
+		return nil, fmt.Errorf("error opening encryption provider configuration file %q: %w", filepath, err)
 	}
 	defer f.Close()
 
 	data, err := io.ReadAll(f)
 	if err != nil {
-		return nil, fmt.Errorf("could not read contents: %v", err)
+		return nil, fmt.Errorf("could not read contents: %w", err)
 	}
 	if len(data) == 0 {
 		return nil, fmt.Errorf("encryption provider configuration file %q is empty", filepath)
@@ -260,9 +294,10 @@ func loadConfig(filepath string) (*apiserverconfig.EncryptionConfiguration, erro
 	return config, validation.ValidateEncryptionConfiguration(config).ToAggregate()
 }
 
-func prefixTransformersAndProbes(config apiserverconfig.ResourceConfiguration, stopCh <-chan struct{}) ([]value.PrefixTransformer, []healthChecker, error) {
+func prefixTransformersAndProbes(config apiserverconfig.ResourceConfiguration, stopCh <-chan struct{}) ([]value.PrefixTransformer, []healthChecker, *kmsState, error) {
 	var transformers []value.PrefixTransformer
 	var probes []healthChecker
+	var kmsUsed kmsState
 
 	for _, provider := range config.Providers {
 		provider := provider
@@ -270,6 +305,7 @@ func prefixTransformersAndProbes(config apiserverconfig.ResourceConfiguration, s
 			transformer    value.PrefixTransformer
 			transformerErr error
 			probe          healthChecker
+			used           *kmsState
 		)
 
 		switch {
@@ -283,9 +319,11 @@ func prefixTransformersAndProbes(config apiserverconfig.ResourceConfiguration, s
 			transformer, transformerErr = secretboxPrefixTransformer(provider.Secretbox)
 
 		case provider.KMS != nil:
-			transformer, probe, transformerErr = kmsPrefixTransformer(provider.KMS, stopCh)
+			transformer, probe, used, transformerErr = kmsPrefixTransformer(provider.KMS, stopCh)
 			if transformerErr == nil {
 				probes = append(probes, probe)
+				kmsUsed.v1Used = kmsUsed.v1Used || used.v1Used
+				kmsUsed.v2Used = kmsUsed.v2Used || used.v2Used
 			}
 
 		case provider.Identity != nil:
@@ -295,17 +333,17 @@ func prefixTransformersAndProbes(config apiserverconfig.ResourceConfiguration, s
 			}
 
 		default:
-			return nil, nil, errors.New("provider does not contain any of the expected providers: KMS, AESGCM, AESCBC, Secretbox, Identity")
+			return nil, nil, nil, errors.New("provider does not contain any of the expected providers: KMS, AESGCM, AESCBC, Secretbox, Identity")
 		}
 
 		if transformerErr != nil {
-			return nil, nil, transformerErr
+			return nil, nil, nil, transformerErr
 		}
 
 		transformers = append(transformers, transformer)
 	}
 
-	return transformers, probes, nil
+	return transformers, probes, &kmsUsed, nil
 }
 
 type blockTransformerFunc func(cipher.Block) value.Transformer
@@ -419,7 +457,11 @@ var (
 	EnvelopeKMSv2ServiceFactory = envelopekmsv2.NewGRPCService
 )
 
-func kmsPrefixTransformer(config *apiserverconfig.KMSConfiguration, stopCh <-chan struct{}) (value.PrefixTransformer, healthChecker, error) {
+type kmsState struct {
+	v1Used, v2Used bool
+}
+
+func kmsPrefixTransformer(config *apiserverconfig.KMSConfiguration, stopCh <-chan struct{}) (value.PrefixTransformer, healthChecker, *kmsState, error) {
 	// we ignore the cancel func because this context should only be canceled when stopCh is closed
 	ctx, _ := wait.ContextForChannel(stopCh)
 
@@ -428,7 +470,7 @@ func kmsPrefixTransformer(config *apiserverconfig.KMSConfiguration, stopCh <-cha
 	case kmsAPIVersionV1:
 		envelopeService, err := envelopeServiceFactory(ctx, config.Endpoint, config.Timeout.Duration)
 		if err != nil {
-			return value.PrefixTransformer{}, nil, fmt.Errorf("could not configure KMSv1-Plugin's probe %q, error: %v", kmsName, err)
+			return value.PrefixTransformer{}, nil, nil, fmt.Errorf("could not configure KMSv1-Plugin's probe %q, error: %w", kmsName, err)
 		}
 
 		probe := &kmsPluginProbe{
@@ -441,16 +483,16 @@ func kmsPrefixTransformer(config *apiserverconfig.KMSConfiguration, stopCh <-cha
 
 		transformer := envelopePrefixTransformer(config, envelopeService, kmsTransformerPrefixV1)
 
-		return transformer, probe, nil
+		return transformer, probe, &kmsState{v1Used: true}, nil
 
 	case kmsAPIVersionV2:
 		if !utilfeature.DefaultFeatureGate.Enabled(features.KMSv2) {
-			return value.PrefixTransformer{}, nil, fmt.Errorf("could not configure KMSv2 plugin %q, KMSv2 feature is not enabled", kmsName)
+			return value.PrefixTransformer{}, nil, nil, fmt.Errorf("could not configure KMSv2 plugin %q, KMSv2 feature is not enabled", kmsName)
 		}
 
 		envelopeService, err := EnvelopeKMSv2ServiceFactory(ctx, config.Endpoint, config.Timeout.Duration)
 		if err != nil {
-			return value.PrefixTransformer{}, nil, fmt.Errorf("could not configure KMSv2-Plugin's probe %q, error: %v", kmsName, err)
+			return value.PrefixTransformer{}, nil, nil, fmt.Errorf("could not configure KMSv2-Plugin's probe %q, error: %w", kmsName, err)
 		}
 
 		probe := &kmsv2PluginProbe{
@@ -467,10 +509,10 @@ func kmsPrefixTransformer(config *apiserverconfig.KMSConfiguration, stopCh <-cha
 			Prefix:      []byte(kmsTransformerPrefixV2 + kmsName + ":"),
 		}
 
-		return transformer, probe, nil
+		return transformer, probe, &kmsState{v2Used: true}, nil
 
 	default:
-		return value.PrefixTransformer{}, nil, fmt.Errorf("could not configure KMS plugin %q, unsupported KMS API version %q", kmsName, config.APIVersion)
+		return value.PrefixTransformer{}, nil, nil, fmt.Errorf("could not configure KMS plugin %q, unsupported KMS API version %q", kmsName, config.APIVersion)
 	}
 }
 
diff --git a/staging/src/k8s.io/apiserver/pkg/server/options/encryptionconfig/config_test.go b/staging/src/k8s.io/apiserver/pkg/server/options/encryptionconfig/config_test.go
index 15c0e93cb95..4d1dfdb83dc 100644
--- a/staging/src/k8s.io/apiserver/pkg/server/options/encryptionconfig/config_test.go
+++ b/staging/src/k8s.io/apiserver/pkg/server/options/encryptionconfig/config_test.go
@@ -177,37 +177,37 @@ func TestEncryptionProviderConfigCorrect(t *testing.T) {
 	// Transforms data using one of them, and tries to untransform using the others.
 	// Repeats this for all possible combinations.
 	correctConfigWithIdentityFirst := "testdata/valid-configs/identity-first.yaml"
-	identityFirstTransformerOverrides, _, err := LoadEncryptionConfig(correctConfigWithIdentityFirst, ctx.Done())
+	identityFirstTransformerOverrides, _, err := LoadEncryptionConfig(correctConfigWithIdentityFirst, false, ctx.Done())
 	if err != nil {
 		t.Fatalf("error while parsing configuration file: %s.\nThe file was:\n%s", err, correctConfigWithIdentityFirst)
 	}
 
 	correctConfigWithAesGcmFirst := "testdata/valid-configs/aes-gcm-first.yaml"
-	aesGcmFirstTransformerOverrides, _, err := LoadEncryptionConfig(correctConfigWithAesGcmFirst, ctx.Done())
+	aesGcmFirstTransformerOverrides, _, err := LoadEncryptionConfig(correctConfigWithAesGcmFirst, false, ctx.Done())
 	if err != nil {
 		t.Fatalf("error while parsing configuration file: %s.\nThe file was:\n%s", err, correctConfigWithAesGcmFirst)
 	}
 
 	correctConfigWithAesCbcFirst := "testdata/valid-configs/aes-cbc-first.yaml"
-	aesCbcFirstTransformerOverrides, _, err := LoadEncryptionConfig(correctConfigWithAesCbcFirst, ctx.Done())
+	aesCbcFirstTransformerOverrides, _, err := LoadEncryptionConfig(correctConfigWithAesCbcFirst, false, ctx.Done())
 	if err != nil {
 		t.Fatalf("error while parsing configuration file: %s.\nThe file was:\n%s", err, correctConfigWithAesCbcFirst)
 	}
 
 	correctConfigWithSecretboxFirst := "testdata/valid-configs/secret-box-first.yaml"
-	secretboxFirstTransformerOverrides, _, err := LoadEncryptionConfig(correctConfigWithSecretboxFirst, ctx.Done())
+	secretboxFirstTransformerOverrides, _, err := LoadEncryptionConfig(correctConfigWithSecretboxFirst, false, ctx.Done())
 	if err != nil {
 		t.Fatalf("error while parsing configuration file: %s.\nThe file was:\n%s", err, correctConfigWithSecretboxFirst)
 	}
 
 	correctConfigWithKMSFirst := "testdata/valid-configs/kms-first.yaml"
-	kmsFirstTransformerOverrides, _, err := LoadEncryptionConfig(correctConfigWithKMSFirst, ctx.Done())
+	kmsFirstTransformerOverrides, _, err := LoadEncryptionConfig(correctConfigWithKMSFirst, false, ctx.Done())
 	if err != nil {
 		t.Fatalf("error while parsing configuration file: %s.\nThe file was:\n%s", err, correctConfigWithKMSFirst)
 	}
 
 	correctConfigWithKMSv2First := "testdata/valid-configs/kmsv2-first.yaml"
-	kmsv2FirstTransformerOverrides, _, err := LoadEncryptionConfig(correctConfigWithKMSv2First, ctx.Done())
+	kmsv2FirstTransformerOverrides, _, err := LoadEncryptionConfig(correctConfigWithKMSv2First, false, ctx.Done())
 	if err != nil {
 		t.Fatalf("error while parsing configuration file: %s.\nThe file was:\n%s", err, correctConfigWithKMSv2First)
 	}
@@ -264,6 +264,8 @@ func TestKMSPluginHealthz(t *testing.T) {
 		config  string
 		want    []healthChecker
 		wantErr string
+		kmsv2   bool
+		kmsv1   bool
 	}{
 		{
 			desc:   "Install Healthz",
@@ -274,6 +276,7 @@ func TestKMSPluginHealthz(t *testing.T) {
 					ttl:  3 * time.Second,
 				},
 			},
+			kmsv1: true,
 		},
 		{
 			desc:   "Install multiple healthz",
@@ -288,6 +291,7 @@ func TestKMSPluginHealthz(t *testing.T) {
 					ttl:  3 * time.Second,
 				},
 			},
+			kmsv1: true,
 		},
 		{
 			desc:   "No KMS Providers",
@@ -306,6 +310,8 @@ func TestKMSPluginHealthz(t *testing.T) {
 					ttl:  3 * time.Second,
 				},
 			},
+			kmsv2: true,
+			kmsv1: true,
 		},
 		{
 			desc:    "Invalid API version",
@@ -325,7 +331,7 @@ func TestKMSPluginHealthz(t *testing.T) {
 				return
 			}
 
-			_, got, err := getTransformerOverridesAndKMSPluginProbes(config, testContext(t).Done())
+			_, got, kmsUsed, err := getTransformerOverridesAndKMSPluginProbes(config, testContext(t).Done())
 			if err != nil {
 				t.Fatal(err)
 			}
@@ -347,6 +353,13 @@ func TestKMSPluginHealthz(t *testing.T) {
 				}
 			}
 
+			if tt.kmsv2 != kmsUsed.v2Used {
+				t.Errorf("incorrect kms v2 detection: want=%v got=%v", tt.kmsv2, kmsUsed.v2Used)
+			}
+			if tt.kmsv1 != kmsUsed.v1Used {
+				t.Errorf("incorrect kms v1 detection: want=%v got=%v", tt.kmsv1, kmsUsed.v1Used)
+			}
+
 			if d := cmp.Diff(tt.want, got,
 				cmp.Comparer(func(a, b *kmsPluginProbe) bool {
 					return *a == *b
@@ -528,7 +541,7 @@ func getTransformerFromEncryptionConfig(t *testing.T, encryptionConfigPath strin
 	ctx := testContext(t)
 
 	t.Helper()
-	transformers, _, err := LoadEncryptionConfig(encryptionConfigPath, ctx.Done())
+	transformers, _, err := LoadEncryptionConfig(encryptionConfigPath, false, ctx.Done())
 	if err != nil {
 		t.Fatal(err)
 	}
diff --git a/staging/src/k8s.io/apiserver/pkg/server/options/etcd.go b/staging/src/k8s.io/apiserver/pkg/server/options/etcd.go
index 6a0a5891410..60d5f36ae70 100644
--- a/staging/src/k8s.io/apiserver/pkg/server/options/etcd.go
+++ b/staging/src/k8s.io/apiserver/pkg/server/options/etcd.go
@@ -43,8 +43,9 @@ import (
 type EtcdOptions struct {
 	// The value of Paging on StorageConfig will be overridden by the
 	// calculated feature gate value.
-	StorageConfig                    storagebackend.Config
-	EncryptionProviderConfigFilepath string
+	StorageConfig                           storagebackend.Config
+	EncryptionProviderConfigFilepath        string
+	EncryptionProviderConfigAutomaticReload bool
 
 	EtcdServersOverrides []string
 
@@ -117,6 +118,10 @@ func (s *EtcdOptions) Validate() []error {
 
 	}
 
+	if len(s.EncryptionProviderConfigFilepath) == 0 && s.EncryptionProviderConfigAutomaticReload {
+		allErrors = append(allErrors, fmt.Errorf("--encryption-provider-config-automatic-reload must be set with --encryption-provider-config"))
+	}
+
 	return allErrors
 }
 
@@ -181,6 +186,10 @@ func (s *EtcdOptions) AddFlags(fs *pflag.FlagSet) {
 	fs.StringVar(&s.EncryptionProviderConfigFilepath, "encryption-provider-config", s.EncryptionProviderConfigFilepath,
 		"The file containing configuration for encryption providers to be used for storing secrets in etcd")
 
+	fs.BoolVar(&s.EncryptionProviderConfigAutomaticReload, "encryption-provider-config-automatic-reload", s.EncryptionProviderConfigAutomaticReload,
+		"Determines if the file set by --encryption-provider-config should be automatically reloaded if the disk contents change. "+
+			"Setting this to true disables the ability to uniquely identify distinct KMS plugins via the API server healthz endpoints.")
+
 	fs.DurationVar(&s.StorageConfig.CompactionInterval, "etcd-compaction-interval", s.StorageConfig.CompactionInterval,
 		"The interval of compaction requests. If 0, the compaction request from apiserver is disabled.")
 
@@ -213,7 +222,7 @@ func (s *EtcdOptions) Complete(storageObjectCountTracker flowcontrolrequest.Stor
 	}
 
 	if len(s.EncryptionProviderConfigFilepath) != 0 {
-		transformerOverrides, kmsPluginHealthzChecks, err := encryptionconfig.LoadEncryptionConfig(s.EncryptionProviderConfigFilepath, stopCh)
+		transformerOverrides, kmsPluginHealthzChecks, err := encryptionconfig.LoadEncryptionConfig(s.EncryptionProviderConfigFilepath, s.EncryptionProviderConfigAutomaticReload, stopCh)
 		if err != nil {
 			return err
 		}
diff --git a/staging/src/k8s.io/apiserver/pkg/server/options/etcd_test.go b/staging/src/k8s.io/apiserver/pkg/server/options/etcd_test.go
index 6fac3d53b7c..0527d3ba741 100644
--- a/staging/src/k8s.io/apiserver/pkg/server/options/etcd_test.go
+++ b/staging/src/k8s.io/apiserver/pkg/server/options/etcd_test.go
@@ -25,9 +25,13 @@ import (
 	"k8s.io/apimachinery/pkg/runtime/schema"
 	"k8s.io/apimachinery/pkg/runtime/serializer"
 	utilerrors "k8s.io/apimachinery/pkg/util/errors"
+	"k8s.io/apimachinery/pkg/util/sets"
+	"k8s.io/apiserver/pkg/features"
 	"k8s.io/apiserver/pkg/server"
 	"k8s.io/apiserver/pkg/server/healthz"
 	"k8s.io/apiserver/pkg/storage/storagebackend"
+	utilfeature "k8s.io/apiserver/pkg/util/feature"
+	featuregatetesting "k8s.io/component-base/featuregate/testing"
 )
 
 func TestEtcdOptionsValidate(t *testing.T) {
@@ -108,6 +112,31 @@ func TestEtcdOptionsValidate(t *testing.T) {
 			},
 			expectErr: "--etcd-servers-overrides invalid, must be of format: group/resource#servers, where servers are URLs, semicolon separated",
 		},
+		{
+			name: "test when encryption-provider-config-automatic-reload is invalid",
+			testOptions: &EtcdOptions{
+				StorageConfig: storagebackend.Config{
+					Type:   "etcd3",
+					Prefix: "/registry",
+					Transport: storagebackend.TransportConfig{
+						ServerList:    []string{"http://127.0.0.1"},
+						KeyFile:       "/var/run/kubernetes/etcd.key",
+						TrustedCAFile: "/var/run/kubernetes/etcdca.crt",
+						CertFile:      "/var/run/kubernetes/etcdce.crt",
+					},
+					CompactionInterval:    storagebackend.DefaultCompactInterval,
+					CountMetricPollPeriod: time.Minute,
+				},
+				EncryptionProviderConfigAutomaticReload: true,
+				DefaultStorageMediaType:                 "application/vnd.kubernetes.protobuf",
+				DeleteCollectionWorkers:                 1,
+				EnableGarbageCollection:                 true,
+				EnableWatchCache:                        true,
+				DefaultWatchCacheSize:                   100,
+				EtcdServersOverrides:                    []string{"/events#http://127.0.0.1:4002"},
+			},
+			expectErr: "--encryption-provider-config-automatic-reload must be set with --encryption-provider-config",
+		},
 		{
 			name: "test when EtcdOptions is valid",
 			testOptions: &EtcdOptions{
@@ -200,12 +229,26 @@ func TestParseWatchCacheSizes(t *testing.T) {
 }
 
 func TestKMSHealthzEndpoint(t *testing.T) {
+	defer featuregatetesting.SetFeatureGateDuringTest(t, utilfeature.DefaultFeatureGate, features.KMSv2, true)()
+
 	testCases := []struct {
 		name                 string
 		encryptionConfigPath string
 		wantChecks           []string
 		skipHealth           bool
+		reload               bool
 	}{
+		{
+			name:                 "no kms-provider, expect no kms healthz check",
+			encryptionConfigPath: "testdata/encryption-configs/no-kms-provider.yaml",
+			wantChecks:           []string{"etcd"},
+		},
+		{
+			name:                 "no kms-provider+reload, expect single kms healthz check",
+			encryptionConfigPath: "testdata/encryption-configs/no-kms-provider.yaml",
+			reload:               true,
+			wantChecks:           []string{"etcd", "kms-providers"},
+		},
 		{
 			name:                 "single kms-provider, expect single kms healthz check",
 			encryptionConfigPath: "testdata/encryption-configs/single-kms-provider.yaml",
@@ -216,6 +259,34 @@ func TestKMSHealthzEndpoint(t *testing.T) {
 			encryptionConfigPath: "testdata/encryption-configs/multiple-kms-providers.yaml",
 			wantChecks:           []string{"etcd", "kms-provider-0", "kms-provider-1"},
 		},
+		{
+			name:                 "two kms-providers+reload, expect single kms healthz check",
+			encryptionConfigPath: "testdata/encryption-configs/multiple-kms-providers.yaml",
+			reload:               true,
+			wantChecks:           []string{"etcd", "kms-providers"},
+		},
+		{
+			name:                 "kms v1+v2, expect three kms healthz checks",
+			encryptionConfigPath: "testdata/encryption-configs/multiple-kms-providers-with-v2.yaml",
+			wantChecks:           []string{"etcd", "kms-provider-0", "kms-provider-1", "kms-provider-2"},
+		},
+		{
+			name:                 "kms v1+v2+reload, expect single kms healthz check",
+			encryptionConfigPath: "testdata/encryption-configs/multiple-kms-providers-with-v2.yaml",
+			reload:               true,
+			wantChecks:           []string{"etcd", "kms-providers"},
+		},
+		{
+			name:                 "multiple kms v2, expect single kms healthz check",
+			encryptionConfigPath: "testdata/encryption-configs/multiple-kms-v2-providers.yaml",
+			wantChecks:           []string{"etcd", "kms-providers"},
+		},
+		{
+			name:                 "multiple kms v2+reload, expect single kms healthz check",
+			encryptionConfigPath: "testdata/encryption-configs/multiple-kms-v2-providers.yaml",
+			reload:               true,
+			wantChecks:           []string{"etcd", "kms-providers"},
+		},
 		{
 			name:                 "two kms-providers with skip, expect zero kms healthz checks",
 			encryptionConfigPath: "testdata/encryption-configs/multiple-kms-providers.yaml",
@@ -231,8 +302,9 @@ func TestKMSHealthzEndpoint(t *testing.T) {
 		t.Run(tc.name, func(t *testing.T) {
 			serverConfig := server.NewConfig(codecs)
 			etcdOptions := &EtcdOptions{
-				EncryptionProviderConfigFilepath: tc.encryptionConfigPath,
-				SkipHealthEndpoints:              tc.skipHealth,
+				EncryptionProviderConfigFilepath:        tc.encryptionConfigPath,
+				EncryptionProviderConfigAutomaticReload: tc.reload,
+				SkipHealthEndpoints:                     tc.skipHealth,
 			}
 			if err := etcdOptions.Complete(serverConfig.StorageObjectCountTracker, serverConfig.DrainedNotify()); err != nil {
 				t.Fatal(err)
@@ -241,11 +313,7 @@ func TestKMSHealthzEndpoint(t *testing.T) {
 				t.Fatalf("Failed to add healthz error: %v", err)
 			}
 
-			for _, n := range tc.wantChecks {
-				if !hasCheck(n, serverConfig.HealthzChecks) {
-					t.Errorf("Missing HealthzChecker %s", n)
-				}
-			}
+			healthChecksAreEqual(t, tc.wantChecks, serverConfig.HealthzChecks)
 		})
 	}
 }
@@ -284,25 +352,25 @@ func TestReadinessCheck(t *testing.T) {
 				t.Fatalf("Failed to add healthz error: %v", err)
 			}
 
-			for _, n := range tc.wantReadyzChecks {
-				if !hasCheck(n, serverConfig.ReadyzChecks) {
-					t.Errorf("Missing ReadyzChecker %s", n)
-				}
-			}
-			for _, n := range tc.wantHealthzChecks {
-				if !hasCheck(n, serverConfig.HealthzChecks) {
-					t.Errorf("Missing HealthzChecker %s", n)
-				}
-			}
+			healthChecksAreEqual(t, tc.wantReadyzChecks, serverConfig.ReadyzChecks)
+			healthChecksAreEqual(t, tc.wantHealthzChecks, serverConfig.HealthzChecks)
 		})
 	}
 }
 
-func hasCheck(want string, healthchecks []healthz.HealthChecker) bool {
-	for _, h := range healthchecks {
-		if want == h.Name() {
-			return true
-		}
+func healthChecksAreEqual(t *testing.T, want []string, healthChecks []healthz.HealthChecker) {
+	t.Helper()
+
+	wantSet := sets.NewString(want...)
+	gotSet := sets.NewString()
+
+	for _, h := range healthChecks {
+		gotSet.Insert(h.Name())
+	}
+
+	gotSet.Delete("log", "ping") // not relevant for our tests
+
+	if !wantSet.Equal(gotSet) {
+		t.Errorf("healthz checks are not equal, missing=%q, extra=%q", wantSet.Difference(gotSet).List(), gotSet.Difference(wantSet).List())
 	}
-	return false
 }
diff --git a/staging/src/k8s.io/apiserver/pkg/server/options/testdata/encryption-configs/multiple-kms-providers-with-v2.yaml b/staging/src/k8s.io/apiserver/pkg/server/options/testdata/encryption-configs/multiple-kms-providers-with-v2.yaml
new file mode 100644
index 00000000000..6003b60e14a
--- /dev/null
+++ b/staging/src/k8s.io/apiserver/pkg/server/options/testdata/encryption-configs/multiple-kms-providers-with-v2.yaml
@@ -0,0 +1,18 @@
+kind: EncryptionConfiguration
+apiVersion: apiserver.config.k8s.io/v1
+resources:
+  - resources:
+      - secrets
+    providers:
+      - kms:
+          name: kms-provider-1
+          cachesize: 1000
+          endpoint: unix:///@provider1.sock
+      - kms:
+          name: kms-provider-2
+          cachesize: 1000
+          endpoint: unix:///@provider2.sock
+      - kms:
+          apiVersion: v2
+          name: kms-provider-3
+          endpoint: unix:///@provider2.sock
diff --git a/staging/src/k8s.io/apiserver/pkg/server/options/testdata/encryption-configs/multiple-kms-v2-providers.yaml b/staging/src/k8s.io/apiserver/pkg/server/options/testdata/encryption-configs/multiple-kms-v2-providers.yaml
new file mode 100644
index 00000000000..4ea8b01299f
--- /dev/null
+++ b/staging/src/k8s.io/apiserver/pkg/server/options/testdata/encryption-configs/multiple-kms-v2-providers.yaml
@@ -0,0 +1,20 @@
+kind: EncryptionConfiguration
+apiVersion: apiserver.config.k8s.io/v1
+resources:
+  - resources:
+      - secrets
+    providers:
+      - kms:
+          apiVersion: v2
+          name: kms-provider-1
+          cachesize: 1000
+          endpoint: unix:///@provider1.sock
+      - kms:
+          apiVersion: v2
+          name: kms-provider-2
+          cachesize: 1000
+          endpoint: unix:///@provider2.sock
+      - kms:
+          apiVersion: v2
+          name: kms-provider-3
+          endpoint: unix:///@provider2.sock
diff --git a/staging/src/k8s.io/apiserver/pkg/server/options/testdata/encryption-configs/no-kms-provider.yaml b/staging/src/k8s.io/apiserver/pkg/server/options/testdata/encryption-configs/no-kms-provider.yaml
new file mode 100644
index 00000000000..37e87109487
--- /dev/null
+++ b/staging/src/k8s.io/apiserver/pkg/server/options/testdata/encryption-configs/no-kms-provider.yaml
@@ -0,0 +1,10 @@
+kind: EncryptionConfiguration
+apiVersion: apiserver.config.k8s.io/v1
+resources:
+  - resources:
+      - secrets
+    providers:
+    - aesgcm:
+        keys:
+        - name: key1
+          secret: c2VjcmV0IGlzIHNlY3VyZQ==
diff --git a/test/integration/controlplane/transformation/all_transformation_test.go b/test/integration/controlplane/transformation/all_transformation_test.go
index bf6775df6b0..e5a4d834251 100644
--- a/test/integration/controlplane/transformation/all_transformation_test.go
+++ b/test/integration/controlplane/transformation/all_transformation_test.go
@@ -95,7 +95,7 @@ resources:
         secret: c2VjcmV0IGlzIHNlY3VyZQ==
 `
 
-	test, err := newTransformTest(t, encryptionConfig)
+	test, err := newTransformTest(t, encryptionConfig, false)
 	if err != nil {
 		t.Fatalf("failed to start Kube API Server with encryptionConfig\n %s, error: %v", encryptionConfig, err)
 	}
diff --git a/test/integration/controlplane/transformation/kms_transformation_test.go b/test/integration/controlplane/transformation/kms_transformation_test.go
index c0b5342001d..7a2767327f5 100644
--- a/test/integration/controlplane/transformation/kms_transformation_test.go
+++ b/test/integration/controlplane/transformation/kms_transformation_test.go
@@ -26,19 +26,16 @@ import (
 	"encoding/base64"
 	"encoding/binary"
 	"fmt"
-	"net/http"
 	"strings"
 	"testing"
 	"time"
 
 	"golang.org/x/crypto/cryptobyte"
+
 	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
-	"k8s.io/apimachinery/pkg/util/wait"
 	"k8s.io/apiserver/pkg/storage/value"
 	aestransformer "k8s.io/apiserver/pkg/storage/value/encrypt/aes"
 	mock "k8s.io/apiserver/pkg/storage/value/encrypt/envelope/testing/v1beta1"
-	"k8s.io/client-go/kubernetes"
-	"k8s.io/client-go/rest"
 	kmsapi "k8s.io/kms/apis/v1beta1"
 )
 
@@ -131,7 +128,7 @@ resources:
 	}
 	defer pluginMock.CleanUp()
 
-	test, err := newTransformTest(t, encryptionConfig)
+	test, err := newTransformTest(t, encryptionConfig, false)
 	if err != nil {
 		t.Fatalf("failed to start KUBE API Server with encryptionConfig\n %s, error: %v", encryptionConfig, err)
 	}
@@ -320,7 +317,7 @@ resources:
 		t.Fatalf("Failed to start KMS Plugin #2: err: %v", err)
 	}
 
-	test, err := newTransformTest(t, encryptionConfig)
+	test, err := newTransformTest(t, encryptionConfig, false)
 	if err != nil {
 		t.Fatalf("Failed to start kube-apiserver, error: %v", err)
 	}
@@ -331,66 +328,103 @@ resources:
 
 	// Stage 1 - Since all kms-plugins are guaranteed to be up, healthz checks for:
 	// healthz/kms-provider-0 and /healthz/kms-provider-1 should be OK.
-	mustBeHealthy(t, "kms-provider-0", test.kubeAPIServer.ClientConfig)
-	mustBeHealthy(t, "kms-provider-1", test.kubeAPIServer.ClientConfig)
+	mustBeHealthy(t, "/kms-provider-0", "ok", test.kubeAPIServer.ClientConfig)
+	mustBeHealthy(t, "/kms-provider-1", "ok", test.kubeAPIServer.ClientConfig)
 
 	// Stage 2 - kms-plugin for provider-1 is down. Therefore, expect the health check for provider-1
 	// to fail, but provider-2 should still be OK
 	pluginMock1.EnterFailedState()
-	mustBeUnHealthy(t, "kms-provider-0", test.kubeAPIServer.ClientConfig)
-	mustBeHealthy(t, "kms-provider-1", test.kubeAPIServer.ClientConfig)
+	mustBeUnHealthy(t, "/kms-provider-0",
+		"internal server error: rpc error: code = FailedPrecondition desc = failed precondition - key disabled",
+		test.kubeAPIServer.ClientConfig)
+	mustBeHealthy(t, "/kms-provider-1", "ok", test.kubeAPIServer.ClientConfig)
 	pluginMock1.ExitFailedState()
 
 	// Stage 3 - kms-plugin for provider-1 is now up. Therefore, expect the health check for provider-1
 	// to succeed now, but provider-2 is now down.
-	// Need to sleep since health check chases responses for 3 seconds.
 	pluginMock2.EnterFailedState()
-	mustBeHealthy(t, "kms-provider-0", test.kubeAPIServer.ClientConfig)
-	mustBeUnHealthy(t, "kms-provider-1", test.kubeAPIServer.ClientConfig)
+	mustBeHealthy(t, "/kms-provider-0", "ok", test.kubeAPIServer.ClientConfig)
+	mustBeUnHealthy(t, "/kms-provider-1",
+		"internal server error: rpc error: code = FailedPrecondition desc = failed precondition - key disabled",
+		test.kubeAPIServer.ClientConfig)
+	pluginMock2.ExitFailedState()
+
+	// Stage 4 - All kms-plugins are once again up,
+	// the healthz check should be OK.
+	mustBeHealthy(t, "/kms-provider-0", "ok", test.kubeAPIServer.ClientConfig)
+	mustBeHealthy(t, "/kms-provider-1", "ok", test.kubeAPIServer.ClientConfig)
 }
 
-func mustBeHealthy(t *testing.T, checkName string, clientConfig *rest.Config) {
-	t.Helper()
-	var restErr error
-	pollErr := wait.PollImmediate(2*time.Second, wait.ForeverTestTimeout, func() (bool, error) {
-		status, err := getHealthz(checkName, clientConfig)
-		restErr = err
-		if err != nil {
-			return false, err
-		}
-		return status == http.StatusOK, nil
-	})
+func TestKMSHealthzWithReload(t *testing.T) {
+	encryptionConfig := `
+kind: EncryptionConfiguration
+apiVersion: apiserver.config.k8s.io/v1
+resources:
+  - resources:
+    - secrets
+    providers:
+    - kms:
+       name: provider-1
+       endpoint: unix:///@kms-provider-1.sock
+    - kms:
+       name: provider-2
+       endpoint: unix:///@kms-provider-2.sock
+`
 
-	if pollErr == wait.ErrWaitTimeout {
-		t.Fatalf("failed to get the expected healthz status of OK for check: %s, error: %v, debug inner error: %v", checkName, pollErr, restErr)
-	}
-}
-
-func mustBeUnHealthy(t *testing.T, checkName string, clientConfig *rest.Config) {
-	t.Helper()
-	var restErr error
-	pollErr := wait.PollImmediate(2*time.Second, wait.ForeverTestTimeout, func() (bool, error) {
-		status, err := getHealthz(checkName, clientConfig)
-		restErr = err
-		if err != nil {
-			return false, err
-		}
-		return status != http.StatusOK, nil
-	})
-
-	if pollErr == wait.ErrWaitTimeout {
-		t.Fatalf("failed to get the expected healthz status of !OK for check: %s, error: %v, debug inner error: %v", checkName, pollErr, restErr)
-	}
-}
-
-func getHealthz(checkName string, clientConfig *rest.Config) (int, error) {
-	client, err := kubernetes.NewForConfig(clientConfig)
+	pluginMock1, err := mock.NewBase64Plugin("@kms-provider-1.sock")
 	if err != nil {
-		return 0, fmt.Errorf("failed to create a client: %v", err)
+		t.Fatalf("failed to create mock of KMS Plugin #1: %v", err)
 	}
 
-	result := client.CoreV1().RESTClient().Get().AbsPath(fmt.Sprintf("/healthz/%v", checkName)).Do(context.TODO())
-	status := 0
-	result.StatusCode(&status)
-	return status, nil
+	if err := pluginMock1.Start(); err != nil {
+		t.Fatalf("Failed to start kms-plugin, err: %v", err)
+	}
+	defer pluginMock1.CleanUp()
+	if err := mock.WaitForBase64PluginToBeUp(pluginMock1); err != nil {
+		t.Fatalf("Failed to start plugin #1, err: %v", err)
+	}
+
+	pluginMock2, err := mock.NewBase64Plugin("@kms-provider-2.sock")
+	if err != nil {
+		t.Fatalf("Failed to create mock of KMS Plugin #2: err: %v", err)
+	}
+	if err := pluginMock2.Start(); err != nil {
+		t.Fatalf("Failed to start kms-plugin, err: %v", err)
+	}
+	defer pluginMock2.CleanUp()
+	if err := mock.WaitForBase64PluginToBeUp(pluginMock2); err != nil {
+		t.Fatalf("Failed to start KMS Plugin #2: err: %v", err)
+	}
+
+	test, err := newTransformTest(t, encryptionConfig, true)
+	if err != nil {
+		t.Fatalf("Failed to start kube-apiserver, error: %v", err)
+	}
+	defer test.cleanUp()
+
+	// Name of the healthz check is always "kms-provider-0" and it covers all kms plugins.
+
+	// Stage 1 - Since all kms-plugins are guaranteed to be up,
+	// the healthz check should be OK.
+	mustBeHealthy(t, "/kms-providers", "ok", test.kubeAPIServer.ClientConfig)
+
+	// Stage 2 - kms-plugin for provider-1 is down. Therefore, expect the healthz check
+	// to fail and report that provider-1 is down
+	pluginMock1.EnterFailedState()
+	mustBeUnHealthy(t, "/kms-providers",
+		"internal server error: kms-provider-0: rpc error: code = FailedPrecondition desc = failed precondition - key disabled",
+		test.kubeAPIServer.ClientConfig)
+	pluginMock1.ExitFailedState()
+
+	// Stage 3 - kms-plugin for provider-1 is now up. Therefore, expect the health check for provider-1
+	// to succeed now, but provider-2 is now down.
+	pluginMock2.EnterFailedState()
+	mustBeUnHealthy(t, "/kms-providers",
+		"internal server error: kms-provider-1: rpc error: code = FailedPrecondition desc = failed precondition - key disabled",
+		test.kubeAPIServer.ClientConfig)
+	pluginMock2.ExitFailedState()
+
+	// Stage 4 - All kms-plugins are once again up,
+	// the healthz check should be OK.
+	mustBeHealthy(t, "/kms-providers", "ok", test.kubeAPIServer.ClientConfig)
 }
diff --git a/test/integration/controlplane/transformation/kmsv2_transformation_test.go b/test/integration/controlplane/transformation/kmsv2_transformation_test.go
index 1865dbd2cb7..6ce20fd0702 100644
--- a/test/integration/controlplane/transformation/kmsv2_transformation_test.go
+++ b/test/integration/controlplane/transformation/kmsv2_transformation_test.go
@@ -140,7 +140,7 @@ resources:
 	}
 	defer pluginMock.CleanUp()
 
-	test, err := newTransformTest(t, encryptionConfig)
+	test, err := newTransformTest(t, encryptionConfig, false)
 	if err != nil {
 		t.Fatalf("failed to start KUBE API Server with encryptionConfig\n %s, error: %v", encryptionConfig, err)
 	}
@@ -253,33 +253,46 @@ resources:
 		t.Fatalf("Failed to start KMS Plugin #2: err: %v", err)
 	}
 
-	test, err := newTransformTest(t, encryptionConfig)
+	test, err := newTransformTest(t, encryptionConfig, false)
 	if err != nil {
 		t.Fatalf("Failed to start kube-apiserver, error: %v", err)
 	}
 	defer test.cleanUp()
 
-	// Name of the healthz check is calculated based on a constant "kms-provider-" + position of the
-	// provider in the config.
+	// Name of the healthz check is always "kms-provider-0" and it covers all kms plugins.
 
-	// Stage 1 - Since all kms-plugins are guaranteed to be up, healthz checks for:
-	// healthz/kms-provider-0 and /healthz/kms-provider-1 should be OK.
-	mustBeHealthy(t, "kms-provider-0", test.kubeAPIServer.ClientConfig)
-	mustBeHealthy(t, "kms-provider-1", test.kubeAPIServer.ClientConfig)
+	// Stage 1 - Since all kms-plugins are guaranteed to be up,
+	// the healthz check should be OK.
+	mustBeHealthy(t, "/kms-providers", "ok", test.kubeAPIServer.ClientConfig)
 
-	// Stage 2 - kms-plugin for provider-1 is down. Therefore, expect the health check for provider-1
-	// to fail, but provider-2 should still be OK
+	// Stage 2 - kms-plugin for provider-1 is down. Therefore, expect the healthz check
+	// to fail and report that provider-1 is down
 	pluginMock1.EnterFailedState()
-	mustBeUnHealthy(t, "kms-provider-0", test.kubeAPIServer.ClientConfig)
-	mustBeHealthy(t, "kms-provider-1", test.kubeAPIServer.ClientConfig)
+	mustBeUnHealthy(t, "/kms-providers",
+		"internal server error: kms-provider-0: rpc error: code = FailedPrecondition desc = failed precondition - key disabled",
+		test.kubeAPIServer.ClientConfig)
 	pluginMock1.ExitFailedState()
 
 	// Stage 3 - kms-plugin for provider-1 is now up. Therefore, expect the health check for provider-1
 	// to succeed now, but provider-2 is now down.
-	// Need to sleep since health check chases responses for 3 seconds.
 	pluginMock2.EnterFailedState()
-	mustBeHealthy(t, "kms-provider-0", test.kubeAPIServer.ClientConfig)
-	mustBeUnHealthy(t, "kms-provider-1", test.kubeAPIServer.ClientConfig)
+	mustBeUnHealthy(t, "/kms-providers",
+		"internal server error: kms-provider-1: rpc error: code = FailedPrecondition desc = failed precondition - key disabled",
+		test.kubeAPIServer.ClientConfig)
+	pluginMock2.ExitFailedState()
+
+	// Stage 4 - All kms-plugins are once again up,
+	// the healthz check should be OK.
+	mustBeHealthy(t, "/kms-providers", "ok", test.kubeAPIServer.ClientConfig)
+
+	// Stage 5 - All kms-plugins are unhealthy at the same time and we can observe both failures.
+	pluginMock1.EnterFailedState()
+	pluginMock2.EnterFailedState()
+	mustBeUnHealthy(t, "/kms-providers",
+		"internal server error: "+
+			"[kms-provider-0: failed to perform status section of the healthz check for KMS Provider provider-1, error: rpc error: code = FailedPrecondition desc = failed precondition - key disabled,"+
+			" kms-provider-1: failed to perform status section of the healthz check for KMS Provider provider-2, error: rpc error: code = FailedPrecondition desc = failed precondition - key disabled]",
+		test.kubeAPIServer.ClientConfig)
 }
 
 func TestKMSv2SingleService(t *testing.T) {
@@ -328,7 +341,7 @@ resources:
 	}
 	t.Cleanup(pluginMock.CleanUp)
 
-	test, err := newTransformTest(t, encryptionConfig)
+	test, err := newTransformTest(t, encryptionConfig, false)
 	if err != nil {
 		t.Fatalf("failed to start KUBE API Server with encryptionConfig\n %s, error: %v", encryptionConfig, err)
 	}
diff --git a/test/integration/controlplane/transformation/secrets_transformation_test.go b/test/integration/controlplane/transformation/secrets_transformation_test.go
index ccbd86ef0ff..58f29d7ba19 100644
--- a/test/integration/controlplane/transformation/secrets_transformation_test.go
+++ b/test/integration/controlplane/transformation/secrets_transformation_test.go
@@ -85,7 +85,7 @@ func TestSecretsShouldBeTransformed(t *testing.T) {
 		// TODO: add secretbox
 	}
 	for _, tt := range testCases {
-		test, err := newTransformTest(t, tt.transformerConfigContent)
+		test, err := newTransformTest(t, tt.transformerConfigContent, false)
 		if err != nil {
 			test.cleanUp()
 			t.Errorf("failed to setup test for envelop %s, error was %v", tt.transformerPrefix, err)
@@ -120,7 +120,7 @@ func BenchmarkAESCBCEnvelopeWrite(b *testing.B) {
 
 func runBenchmark(b *testing.B, transformerConfig string) {
 	b.StopTimer()
-	test, err := newTransformTest(b, transformerConfig)
+	test, err := newTransformTest(b, transformerConfig, false)
 	defer test.cleanUp()
 	if err != nil {
 		b.Fatalf("failed to setup benchmark for config %s, error was %v", transformerConfig, err)
diff --git a/test/integration/controlplane/transformation/transformation_testcase.go b/test/integration/controlplane/transformation/transformation_test.go
similarity index 82%
rename from test/integration/controlplane/transformation/transformation_testcase.go
rename to test/integration/controlplane/transformation/transformation_test.go
index 14da3360eba..c949f503790 100644
--- a/test/integration/controlplane/transformation/transformation_testcase.go
+++ b/test/integration/controlplane/transformation/transformation_test.go
@@ -26,26 +26,28 @@ import (
 	"strconv"
 	"strings"
 	"testing"
-
-	"k8s.io/klog/v2"
+	"time"
 
 	clientv3 "go.etcd.io/etcd/client/v3"
-	"k8s.io/component-base/metrics/legacyregistry"
-	"sigs.k8s.io/yaml"
 
 	corev1 "k8s.io/api/core/v1"
 	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
 	"k8s.io/apimachinery/pkg/apis/meta/v1/unstructured"
 	"k8s.io/apimachinery/pkg/runtime/schema"
+	"k8s.io/apimachinery/pkg/util/wait"
 	apiserverconfigv1 "k8s.io/apiserver/pkg/apis/config/v1"
 	"k8s.io/apiserver/pkg/storage/storagebackend"
 	"k8s.io/apiserver/pkg/storage/value"
 	"k8s.io/client-go/dynamic"
 	"k8s.io/client-go/kubernetes"
+	"k8s.io/client-go/rest"
+	"k8s.io/component-base/metrics/legacyregistry"
+	"k8s.io/klog/v2"
 	kubeapiservertesting "k8s.io/kubernetes/cmd/kube-apiserver/app/testing"
 	"k8s.io/kubernetes/test/integration"
 	"k8s.io/kubernetes/test/integration/etcd"
 	"k8s.io/kubernetes/test/integration/framework"
+	"sigs.k8s.io/yaml"
 )
 
 const (
@@ -78,7 +80,7 @@ type transformTest struct {
 	secret            *corev1.Secret
 }
 
-func newTransformTest(l kubeapiservertesting.Logger, transformerConfigYAML string) (*transformTest, error) {
+func newTransformTest(l kubeapiservertesting.Logger, transformerConfigYAML string, reload bool) (*transformTest, error) {
 	e := transformTest{
 		logger:            l,
 		transformerConfig: transformerConfigYAML,
@@ -92,7 +94,7 @@ func newTransformTest(l kubeapiservertesting.Logger, transformerConfigYAML strin
 		}
 	}
 
-	if e.kubeAPIServer, err = kubeapiservertesting.StartTestServer(l, nil, e.getEncryptionOptions(), e.storageConfig); err != nil {
+	if e.kubeAPIServer, err = kubeapiservertesting.StartTestServer(l, nil, e.getEncryptionOptions(reload), e.storageConfig); err != nil {
 		return nil, fmt.Errorf("failed to start KubeAPI server: %v", err)
 	}
 	klog.Infof("Started kube-apiserver %v", e.kubeAPIServer.ClientConfig.Host)
@@ -105,6 +107,15 @@ func newTransformTest(l kubeapiservertesting.Logger, transformerConfigYAML strin
 		return nil, err
 	}
 
+	if transformerConfigYAML != "" && reload {
+		// when reloading is enabled, this healthz endpoint is always present
+		mustBeHealthy(l, "/kms-providers", "ok", e.kubeAPIServer.ClientConfig)
+
+		// excluding healthz endpoints even if they do not exist should work
+		mustBeHealthy(l, "", `warn: some health checks cannot be excluded: no matches for "kms-provider-0","kms-provider-1","kms-provider-2","kms-provider-3"`,
+			e.kubeAPIServer.ClientConfig, "kms-provider-0", "kms-provider-1", "kms-provider-2", "kms-provider-3")
+	}
+
 	return &e, nil
 }
 
@@ -228,10 +239,11 @@ func (e *transformTest) getRawSecretFromETCD() ([]byte, error) {
 	return etcdResponse.Kvs[0].Value, nil
 }
 
-func (e *transformTest) getEncryptionOptions() []string {
+func (e *transformTest) getEncryptionOptions(reload bool) []string {
 	if e.transformerConfig != "" {
 		return []string{
 			"--encryption-provider-config", path.Join(e.configDir, encryptionConfigFileName),
+			fmt.Sprintf("--encryption-provider-config-automatic-reload=%v", reload),
 			"--disable-admission-plugins", "ServiceAccount"}
 	}
 
@@ -401,3 +413,59 @@ func (e *transformTest) printMetrics() error {
 
 	return nil
 }
+
+func mustBeHealthy(t kubeapiservertesting.Logger, checkName, wantBodyContains string, clientConfig *rest.Config, excludes ...string) {
+	t.Helper()
+	var restErr error
+	pollErr := wait.PollImmediate(2*time.Second, wait.ForeverTestTimeout, func() (bool, error) {
+		body, ok, err := getHealthz(checkName, clientConfig, excludes...)
+		restErr = err
+		if err != nil {
+			return false, err
+		}
+		done := ok && strings.Contains(body, wantBodyContains)
+		if !done {
+			t.Logf("expected server check %q to be healthy with message %q but it is not: %s", checkName, wantBodyContains, body)
+		}
+		return done, nil
+	})
+
+	if pollErr == wait.ErrWaitTimeout {
+		t.Fatalf("failed to get the expected healthz status of OK for check: %s, error: %v, debug inner error: %v", checkName, pollErr, restErr)
+	}
+}
+
+func mustBeUnHealthy(t kubeapiservertesting.Logger, checkName, wantBodyContains string, clientConfig *rest.Config, excludes ...string) {
+	t.Helper()
+	var restErr error
+	pollErr := wait.PollImmediate(2*time.Second, wait.ForeverTestTimeout, func() (bool, error) {
+		body, ok, err := getHealthz(checkName, clientConfig, excludes...)
+		restErr = err
+		if err != nil {
+			return false, err
+		}
+		done := !ok && strings.Contains(body, wantBodyContains)
+		if !done {
+			t.Logf("expected server check %q to be unhealthy with message %q but it is not: %s", checkName, wantBodyContains, body)
+		}
+		return done, nil
+	})
+
+	if pollErr == wait.ErrWaitTimeout {
+		t.Fatalf("failed to get the expected healthz status of !OK for check: %s, error: %v, debug inner error: %v", checkName, pollErr, restErr)
+	}
+}
+
+func getHealthz(checkName string, clientConfig *rest.Config, excludes ...string) (string, bool, error) {
+	client, err := kubernetes.NewForConfig(clientConfig)
+	if err != nil {
+		return "", false, fmt.Errorf("failed to create a client: %v", err)
+	}
+
+	req := client.CoreV1().RESTClient().Get().AbsPath(fmt.Sprintf("/healthz%v", checkName)).Param("verbose", "true")
+	for _, exclude := range excludes {
+		req.Param("exclude", exclude)
+	}
+	body, err := req.DoRaw(context.TODO()) // we can still have a response body during an error case
+	return string(body), err == nil, nil
+}