What happens to money you’ve spent toward a deductible on your health plan when your employer changes plans mid year?
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UPDATED: Jun 19, 2018
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Company-offered health insurance is not under the employee’s control. Instead, the plan offered is determined by the employer, and on the anniversary of a plan (since plans are typically for one year at a time), the employer can change the available plans, benefits, copayments, or employee contribution. It can even change providers. These changes can pose very significant problems for employees. The difficulty arises because plan years are determined by the date of adoption, or anniversary, while deductibles are based on calendar years. For example, a plan year may end in June or July, when the calendar year is half-way done.
Suppose an employee with a June plan anniversary has a deductible of $1,000 and, by June, has spent $600 towards it. The employer now changes plans or providers. A new plan is in place, also with a $1,000 deductible. What happens to the $600 the employee has spent year to date towards the deductible? It’s lost, unfortunately. It does not carry over to the new plan and there is no obligation for the employer or the insurance provider to allow any credit towards the new deductible. There’s also no obligation to refund or return any money paid or spent under the old plan. The $600 spent year to date towards qualifying under the old deductible didn’t and won’t get the employee anything, since he or she never hit the magic threshold of the deductible. For the balance of the year, the employee will only have six months or so to spend $1,000 to qualify under the new plan’s deductible. The employee is hit both coming and going.
Just to reinforce the point, there is no recourse for this situation. While it’s frustrating and unfair, it’s legally proper. An employer is under no obligation to even provide health insurance. Even under the new health insurance reform legislation, the employer could opt to pay a fine rather than provide insurance. This means the employer can change plans at any legal opportunity, such as when a plan ends, on its anniversary date. Each health plan is governed by the terms of its policy; insurance is a contract, after all. If an employee does not meet some requirement under a plan, the insurer is entitled to hold the employee to the consequences of that failure, such as not giving him or her credit for a deductible. If they so chose, an employer can commonly change plans. If he or she chooses a high-deductible option with a mid-year anniversary date, most employees will never satisfy the deductibles.