a guide to understanding health insurance

What To Do When Your Deductible Resets?

I. Introduction 

When it comes to health insurance, one of the most important things to understand is your deductible. A deductible is the amount of money you have to pay out of pocket before your insurance kicks in. Unfortunately, health insurance deductibles have been trending upwards in recent years, making it increasingly challenging for people to plan for them. In fact, 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%. And for workers in small firms, the percentage is even higher at 68% compared to 50% for workers in large firms. Additionally, in 2019, 28% of covered workers were enrolled in a plan with a deductible of $2,000 or more, which is up from 26% the previous year. So, understanding when your deductible resets is more important than ever.

II. Types of Deductible Schedules

There are two types of deductible schedules: calendar year and plan year. 

A. Calendar year schedule: 

This type of schedule works 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 towards your deductible. This type of schedule is the most common and easiest to understand. 

B. Plan year schedule: 

In this type of schedule, a plan year begins when an insurance policy renews on the first day of any month in the year. This means that your deductible might reset back to $0 on the first day of a month other than January. It’s important to know which schedule your plan follows so that you can plan accordingly and avoid any unexpected bills.

III. Impact of Midyear Changes

If your employer switches to a higher deductible health plan at renewal or if you choose 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 towards the former deductible is often rolled over into the new deductible, to be met before the end of the calendar year. However, 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 find themselves working towards a new/additional deductible. It’s important for employers to ask their agent about the impact changing deductibles will have on their employees and for employees to ask their agent for expert assistance in understanding their new plan.

IV. Fourth-Quarter Rollover

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 a 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!

V. Conclusion

In conclusion, understanding when your health insurance deductible resets is crucial. It’s important to know whether your plan follows a calendar year or plan year schedule, and to be aware of the potential impact of midyear changes. Additionally, it’s also helpful to know if your plan includes fourth-quarter rollover. Remember, if you have any questions,it’s always best to reach out to your insurance agent for expert assistance in understanding your plan. They can help you navigate the complexities of your deductible and provide valuable information on how to make the most of your coverage. At Medmo, our goal is to empower individuals with the knowledge and resources they need to make informed decisions about their health insurance. So, if you have any questions or concerns about your deductible, don’t hesitate to reach out to us. We’re here to help! And, don’t forget to check your deductible schedule and plan for any upcoming medical expenses. With the right information and plan, you can avoid unexpected bills and have peace of mind knowing that you’re covered.

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