What happens to money you’ve spent toward a deductible on your health plan when your employer changes plans mid year?

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.

Case Studies: What Happens to Spent Deductibles When Employers Change Plans Mid-Year?

Case Study 1: John’s Lost Deductible

John, an employee with a June plan anniversary, had already spent $600 towards his $1,000 deductible by June. However, his employer decided to change plans, introducing a new plan with the same $1,000 deductible.

Unfortunately, the $600 John had already spent does not carry over to the new plan. Despite his efforts to meet the deductible under the previous plan, he must start from scratch under the new plan, leaving him with only six months to spend $1,000 to qualify under the new deductible.

Case Study 2: Lisa’s Frustration

Lisa also faced a similar situation. Her employer changed to a high-deductible plan with a mid-year anniversary date. With this change, Lisa realized that most employees would never satisfy the deductibles, as it would be challenging to meet the deductible requirements within the limited timeframe. This realization left her frustrated and disappointed.

Case Study 3: No Recourse for Employees

We highlight the lack of recourse for employees facing mid-year plan changes. Despite the frustration and unfairness of the situation, employees have no legal means to recover the money spent towards the deductible under the old plan.

Employers are not obligated to provide health insurance and can change plans at any legal opportunity. Insurance policies are governed by their terms, which means that if an employee fails to meet the requirements under a plan, they may not receive credit for the deductible.