Health insurance deductibles are trending upwards and planning for them is an increasing challenge. According to the Kaiser Family Foundation’s 2019 Employer Health Benefits Survey:
· Over the past five years, the percentage of covered workers with a general annual deductible of $1,000 or more for single coverage has grown 34%.
· Workers in small firms are considerably more likely to have a general annual deductible of $1,000 or more for single coverage than workers in large firms (68% vs. 50%).
· In 2019, 28% of covered workers are enrolled in a plan with a deductible of $2,000 or more. In 2018 it was 26%. For covered workers in small firms it is even higher at 45%!
An unexpected bill for medical services is an unwelcome surprise for anyone, and often, these charges result from a deductible schedule outlined in the terms of a health insurance plan. As deductibles become a larger part of the employee’s cost-sharing responsibility, employers and their employees need to be mindful of when deductibles reset, how they can change at the beginning of a plan year, and when they can rollover.
Plans that follow a calendar year deductible schedule work like this: the medical expenses you pay for covered services accumulate towards your annual deductible throughout the year, and this accumulated amount resets to $0 on January 1 of each year. (Keep in mind that copays and premiums do not count toward your deductible.) Some plans, however, follow a plan year deductible schedule. A plan year begins when an insurance policy renews— on the first day of any month in the year. This means your deductible might reset back to $0 on the first day of a month other than January. Knowing which schedule your plan follows can help you avoid those unexpected bills and plan for known medical expenses.
If an employer switches to a higher deductible health plan at renewal or an employee chooses a higher deductible plan during open enrollment, the new deductible is in force at the beginning of the plan year, which might not be January 1. With midyear changes on plans that follow a calendar year deductible schedule, the amount accumulated toward the former deductible is often rolled over into the new deductible, to be met before the end of the calendar year. This may not always be the case and can be further complicated by switching carriers at renewal. Employees who have met their previous deductible might suddenly—and often unknowingly—find themselves working towards a new/additional deductible! Employers should always ask their agent about the impact changing deductibles will have on their employees, and their agent can provide expert assistance helping employees understand their new plan.
Fourth-quarter rollover is a very helpful feature of plans that follow a calendar year deductible schedule. This allows amounts applied to your deductible in the fourth quarter to rollover and apply to your deductible in the next calendar year. It’s a good idea to ask if your plan includes this feature because not all plans do. (Most HSA eligible plans exclude this feature.) Having fourth-quarter rollover means you don’t have to delay medical treatment in the last three months of the year for fear of your deductible resetting on January 1!
Group health insurance plans are highly customizable, and it’s important to understand the full impact of alterations made to your plan—especially when it comes to changing a plan’s annual deductible. Features can differ significantly between plans for small and large businesses. It’s always best to check with a knowledgeable agent to confirm when your deductible resets, how your deductible can change during the year, and what happens to your deductible at the end of the year. As deductibles continue to rise and become a larger part of an insured’s cost-sharing responsibilities, knowing these things can help you plan wisely for both the anticipated and unexpected medical expenses you’ll encounter throughout the year.