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?
First, let's start with the basics. 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."
What Happens to My Deductible If I Change Plans?
If an employee were to change plans in the middle of a calendar or plan year, the money that was already spent towards the previous deductible generally would not count for the new plan. Sometimes, the money that was spent on cost-sharing expenses, like deductibles, copays, and co-insurance can be used as a tax deduction. To see if you qualify for cost-sharing reductions, there is an application on HealthCare.gov.
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