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?

A deductible is the amount of money an individual pays out of pocket for medical care each year before health insurance contributes to the cost of services. This excludes copays and certain preventive services, which may be covered automatically. 

Deductibles can vary in range, depending on the chosen health plan. There are high deductible health plans (HDHP) and low deductible health plans (LDHP). With an HDHP,  the premiums are generally lower. The premiums are the amount withheld from your regular paycheck by your employer to pay for your insurance plan. While the cost per paycheck is lower, it could take a while to meet the deductible, so it may not be best for someone who may anticipate frequent medical expenses.  

LDHPs may cost more upfront in the form of higher premiums, but they require less medical cost before the deductible is met. These plans are designed for an individual or a family who foresee regular medical care. Understanding the various costs of HDHPs and LDHPs can be challenging.  

Using a benefits administration feature from an all-in-one HRIS can help your employees better understand their upfront costs. BerniePortal offers employers the opportunity to provide employees with a cart of coverage options that breaks down how certain benefits impact paychecks, so your workforce can make informed decisions during open enrollment.

When Do Deductibles Reset?

There are two ways that health plans work when it comes to the timing for deductibles to reset, referred to as either calendar year deductibles or plan year deductibles.  

A calendar year deductible plan runs from January 1st to December 31st. These plans’ deductibles reset every January 1st.  A plan year deductible resets on the anniversary date of your plan’s original effective date, or its renewal date. For instance, if your organization's health plan renews on June 1st, then your deductible would run from June 1st to May 31st of the following year and would reset on June 1st 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