Most of the health plans that you offer to your employees will come with a medical deductible that they have to meet every year. Fortunately, there are some plans that allow participants to apply the money that they spend toward that deducible in the fourth quarter to the following year’s deductible. As the employer, you can set up the health plan to allow such a rollover, providing your employees with more flexibility in how they spend their health care dollars.
The fourth-quarter rollover, if allowed by your insurance plan, is especially helpful for any employee who spends little to no money on medical expenses during the first nine months of the calendar year. For example, if you have an employee who only pays into her deductible in the last three months of the year, she wouldn’t face paying down another full deductible for medical services when the new year comes around. If she spent $1,400 towards her $2,000 deductible between October 1 and December 31, then she only has to spend $600 in the following year before the health plan picks up some of her health service costs.
HSAs and FSAs
Health spending accounts (HSA) and flexible spending accounts (FSA) work well with the rollover option for a medical deductible you choose to set it up for your plan. Any money that goes into an HSA or FSA is tax-free. Because the money that employees spend toward their deductible qualifies as an HSA or FSA expense, your employees effectively reduce the out-of-pocket cost of the deductible when they use those tax-free HSA or FSA funds to pay for deductible expenses. Just like fourth-quarter deductible spending, HSA and FSA money can also roll over into the next year, although FSA rollovers must be set up by the employer ahead of time. Any money in an HSA will automatically roll over. Up to $500 of your employees’ money in their FSAs can also roll over if you give them that option when you create the health plan with the insurance company, as detailed by the IRS.
More Flexibility for Your Employees
Knowing about the rollover option for a medical deductible can help your employees spend their health care dollars more wisely. Your employees will be less likely to avoid the doctor at the end of the year because anything paid toward the medical deductible carries into the next year. Inversely, if your employees have already paid the full deductible by the end of the third quarter, they can consider using the last three months of the year as an opportunity to make use of their health plan without paying any additional deductible.
Including the deductible rollover in the health plan that you offer to your employees will improve employee satisfaction with their health benefits and help you retain your top talent. Armed with the knowledge of how to best use plan options together, your employees can benefit from smart spending and well-timed usage to save money while getting the most out of the insurance that you offer.
Dylan Murray has an MBA from San Diego State University and a bachelor’s degree in communication from Boston University. He is a licensed insurance agent in California, but he works as a professional researcher and writer reporting on business trends in estate law, insurance and private security. Dylan has worked as a script analyst with the Sundance Institute and the Scriptwriters Network in Los Angeles. He lives in San Diego, California, and Marseille, France.