When Do Deductibles Reset?

Some organizations renew health plans mid-year, which could cause worry among employees regarding their deductible timeline. There could be concern that their deductible will reset, impacting medical decisions. Employees may be unsure if they should hold off on important appointments or surgeries. 

Eliminating any ambiguity around the structure of deductibles and when they reset can alleviate a great deal of unnecessary stress for your employees.

What Is a Deductible in Health Insurance?

Before diving into when deductibles reset, let’s clarify what a deductible is in health insurance. A deductible is the amount of money an individual must pay out of pocket for covered medical services each year before the health insurance plan begins contributing. This typically excludes copays and certain preventive services, which may be covered automatically.

Understanding how deductibles work—and when they reset—is crucial for employees making healthcare decisions, especially around open enrollment or major medical needs.

High vs. Low Deductible Health Plans

Deductibles can vary based on the type of health plan:

• High Deductible Health Plans (HDHPs) usually offer lower premiums (the amount deducted from paychecks) but require more out-of-pocket spending before insurance kicks in. These plans may be best suited for individuals who don’t anticipate frequent medical expenses.

• Low Deductible Health Plans (LDHPs) have higher premiums but cover more upfront costs, making them a good option for people who expect regular medical care.

Navigating HDHPs and LDHPs can be overwhelming, but HR tech like BerniePortal’s benefits administration feature helps employees understand how different plans affect their paychecks and medical costs.

When Do Health Insurance Deductibles Reset?

There are two typical structures for when deductibles reset:

• Calendar Year Deductibles reset every January 1 and run through December 31.

• Plan Year Deductibles reset on the anniversary of your plan’s start date. For example, if your organization’s health plan renews on June 1, the deductible runs from June 1 to May 31 each year.

It is important to note that the date that an employee is hired does not alter these dates for the employee. Health insurance deductibles are not prorated for employees based on when they were hired or otherwise joined the plan. According to Smart Compliance, the ultimate rule is, "no matter how few months are left in the plan year that a user signs up for, they are still responsible for meeting their deductible before insurers start to pay." 

How to Plan for a Deductible Reset

As the end of the year or your plan’s renewal date approaches, you’ll want to be aware of the timing and how it affects your healthcare decisions. Here’s how to plan:

Schedule Procedures Before the Reset 

If you're nearing the end of your deductible year and have upcoming medical procedures, such as surgeries, lab work, or diagnostic testing, it may be more cost-effective to schedule them before the deductible resets. If you've already met a significant portion of your deductible, paying for these procedures before the reset could save you money.

Consider Your Flexible Spending Account (FSA)

If your organization offers an FSA, be aware that unused funds typically do not roll over into the new year. This means it’s in your best interest to use any remaining balance before your deductible resets. An FSA can cover a wide range of medical expenses, including prescription medications, dental treatments, and certain over-the-counter items.

If your employer allows FSA rollover due to the Consolidated Appropriations Act of 2020, check the specifics to see if you can carry over any remaining funds. However, many FSAs still require you to use the funds by the end of the plan year.

Maximize Your Health Savings Account (HSA):

Since HSAs roll over from year to year, there’s no rush to spend the funds before your deductible resets. However, if you anticipate upcoming medical expenses, you may want to consider using some of your HSA funds for procedures before the new plan year starts. Since the balance in your HSA carries over indefinitely, you can leave it to grow for future medical costs, including expenses in retirement.

What Happens to My Deductible If I Change Plans? 

If you switch health plans during the year, whether from one calendar year plan to another or from one plan year deductible to a different one, the money you’ve already paid toward your deductible in your current plan does not transfer to the new plan. This could mean you’ll have to meet a new deductible from scratch if you change plans mid-year.

In some cases, money spent on medical care, including deductibles, copayments, and co-insurance, may qualify for tax deductions. If you're uncertain, check with HealthCare.gov or your HR department to learn more about how cost-sharing expenses can be used for tax purposes.

Additional Resources 

You can stay informed, educated, and up to date with important HR topics using BerniePortal’s comprehensive resources:

• BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
• BerniePortal Blog—a one-stop shop for HR industry news
• HR Glossary—featuring the most common HR terms, acronyms, and compliance
• Resource Library—essential guides covering a comprehensive list of HR topics
• HR Party of One—our popular YouTube series and podcast, covering emerging HR trends and enduring HR topics