When Do Deductibles Start Over for Employees?
When an organization renews health plans in the middle of the year, employees might worry that their deductible will reset. It’s an understandable worry; if they’re close to meeting their deductible and have to start all over again, it could impact their medical decisions and their financial health. Read on for more details on how to guide employees through health plan renewals.
Do Deductibles Start Over When a Health Plan is Renewed?
The answer depends on why the health plan is being renewed. Deductibles renewing can have a profound effect on an employee’s benefits, financial situation, and medical decisions.
Say, for example, that an employee has an expensive knee replacement surgery in January and learns that their organization is renewing their health plan in April. If their deductible did start over in April, they might be hesitant to schedule their other knee later in the year. Not only does this impact them financially, but it also affects things like their recovery schedule and taking time off of work.
Most likely, an employee’s deductible will not start over when an organization renews the group health plan. Instead, their deductible will start over on January 1 of next year. Why? A deductible usually applies every calendar year, that's why it's referred to as a calendar year deductible and often defined as the amount an individual needs to reach each calendar year before they start paying copays or coinsurance for many services covered by their plan.
This means that between January and December, an employee’s health care bills—excluding coinsurance and non-covered expenses—would need to exceed their deductible before the insurance company would start paying.
Is There a Situation Where Deductibles Would Start Over?
Technically, yes. Here's the tricky part about organizations renewing the health plan mid-year: if an individual doesn't select the same health plan, then their deductible will start over as soon as the new plan takes effect.
If an employer decides to drop the group health plan and give employees a monthly amount to spend on individual health insurance (this is called a defined contribution) or an employer moves to a Private Exchange with a different health insurance company, employees can expect for their deductible to possibly start over with this shift in health insurance strategy.
What Else Should Employers Know about Deductibles Resetting?
Employees should approach their HR advisor to inquire about the health plan selections. This will help them determine whether or not they should go ahead and have their second knee replacement surgery before April.
Employees might (and should) ask if the company will still be offering the same health plan that they currently have. If the answer is no, then the employee’s deductible will reset in April. If the answer is yes, then their deductible won't reset until January 1.
Reminder: What is a Deductible?
A deductible is the amount a person pays each year for most eligible medical services or medications before their health insurance begins to contribute to the cost of covered services.
Typically, deductibles apply every calendar year. This means that between January and December, your healthcare bills would need to exceed your deductible before the insurance company would start paying, excluding copays, coinsurance, and non-covered expenses.
Imagine that a person has been having trouble with their back. They decide to see a chiropractor to get adjusted and, thankfully, it works. They’re so pleased with the results that they continue to return every other week.
Let’s say that their health insurance covers 70% of the cost for each of their visits to the chiropractor. They’re left to pay the rest out of pocket, which ends up being $60 per visit. This amount that they pay which isn’t covered by insurance counts towards their deductible—a preset amount that resets at the end of each benefits renewal period. (The deductibles can also change, depending on your coverage.)
Once they’ve met or exceeded the amount designated by their deductible, the health insurance covers the rest of their qualifying medical costs through the end of the coverage period.
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