You may already be familiar with the concept of a health insurance deductible but not sure exactly what a deductible credit transfer is. Luckily, you’ve come to the right place. We’ll help you find out what a health insurance deductible credit transfer is all about, how it can affect your employees and your small business, and how to get access to health insurance plans that allow deductible credits.

Health insurance form on table

What Is a Health Insurance Deductible?

A health insurance deductible is the amount a plan member pays each year before the health plan begins to pay. For example, a member may have to meet a $1,000 annual deductible before the plan pays its share of the cost for a surgery. But some types of services, such as preventive care, can be covered even if the deductible has not been met.

How Does a Deductible Credit Transfer Work?

If a health insurance plan member has paid toward his or her deductible and then switches plans, some companies allow that paid portion of the deductible to transfer to the new health plan. This process is called a deductible credit transfer.

Let’s look at an example of how this works. Mary is on Health Plan A through her employer and has paid $500 toward her deductible. Her employer’s small group health insurance plan year ends in May. When Mary renews her health coverage in May, she switches to Health Plan B, which also has a deductible. The insurance company applies a $500 credit toward Mary’s new deductible.

Who Is Eligible for a Health Insurance Deductible Transfer?

Hand pointing to facesPeople with employer-sponsored group health insurance plans may be eligible for deductible credit transfers. If a business owner changes to a new group health plan provider, it’s usually required that members of the group be employees who were enrolled in health insurance coverage before the switch to claim a health insurance deductible transfer.

Who Is Not Eligible for a Deductible Transfer Credit?

New hires: A new employee cannot usually claim a deductible credit on his or her new job’s health plan. For example, if Mary paid toward her deductible while working at Company A, Mary is not eligible for a transfer credit through Company B.

Individual health plan members: Deductible credit transfers don’t often apply to people with individual health insurance. But some individual health plans have a “shrinking deductible ”that goes down each year if the member doesn’t have a lot of expenses or claims. However, a shrinking deductible is not the same as a deductible credit transfer because no credit is applied to a new health plan.

How Can My Employees Claim Deductible Credits?

Your employees must submit a form to the insurance company for their new health plan to claim a credit. Some insurance companies may have a deadline by which the form must be submitted, such as within 90 days of the effective coverage date. The form must have the required information, which typically includes the:

  1. Name of the employee
  2. Employee’s member ID for the new health plan
  3. Group name and/or number for the new health plan
  4. Name(s) of dependent(s) who were on the previous health plan
  5. Relationship of dependent(s) to the employee, such as spouse or child
  6. Amount each person paid toward the previous health plan’s deductible
  7. Explanation of Benefits (EOB) statement for each person on the previous health plan

Pros and Cons of Deductible Credit Transfers for Employees

Some of the pros of health insurance deductible credits for employees are:

  1. It saves money. Not having to pay the full deductible amount for a calendar year can be a big financial benefit for employees.
  2. It applies to everyone on the plan. If a health plan has separate deductibles for each dependent, the insurance company will usually allow a deductible credit transfer for each one. This is also a financial plus for employees.
  3. It’s flexible. Deductible credits can apply when a member changes health plans within the same company or to a different insurance company.

Some of the cons of a health insurance deductible transfer for employees are:

  1. It’s not mandatory. There’s no law that requires insurance companies to give employees a credit toward their new health plan’s deductible when they’ve already paid money into their old health plan’s deductible.
  2. It’s not common. If you search for “deductible credit transfer” in Google, you’ll find few companies that offer this benefit. Health insurance deductible credit transfers are not a popular practice. In fact, you’re likely to find information saying you will lose any money spent on your old plan’s deductible when you switch to a new plan.
  3. It’s not automatic. An employee has to submit paperwork to the insurance company to qualify for a credit. After reviewing the paperwork, the insurance company may determine the employee doesn’t qualify.

Deductible Credits and the Small Business Owner

Woman business owner smilingThe role health insurance deductible credits play in small business has a lot to do with how your employees feel—positive or negative.

  • Positive impact: If employees are able to get a deductible credit transfer, then all is well in the universe. Your employees will likely be happy they don’t have to start all over to meet their deductibles for the calendar year. They may also feel more satisfied with their health insurance benefits, more fulfilled in their work, and more productive. All that, of course, is good for business.
  • Negative impact: Let’s say you switch to a new plan midyear because you want an employee benefit package with better health coverage. The new insurance company doesn’t allow employees to claim deductible credits. Of course, this news wouldn’t make employees happy if they’ve already paid $500 toward their previous health plan’s $1,000 deductible. If the deductible for the new health plan is also $1,000, employees may have just 5 or 6 months left in the calendar year to meet this deductible. The likely result of this change is that employees think it’s unfair because the decision was out of their control.

But what if your employees chose to switch to a different plan and the new plan didn’t allow a health insurance deductible credit transfer? They may still be unhappy with restarting their deductibles, but it may be a lesser blow because it was their decision to switch.

So what can you do to increase positive outcomes when it comes to deductible credit transfers?

One way to do this is to work with a company like HealthMarkets. We partner with more than 200 health insurance providers to give you access to thousands of plans. And many of the providers we work with allow employees to claim a deductible transfer credit. A HealthMarkets licensed insurance agent can help you find the right plan for your small business. Just give us a call at (800) 976-5818.

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References

https://www.anthem.com/agent/noapplication/f4/s2/t0/pw_ad088704.pdf?refer=ahpagent | http://www.summacare.com/Libraries/Documents/Deductible_Credit_Transfer_Form.sflb.ashx | http://www.aetnastatenj.com/employer/pdf/2013/DeductibleCreditLetter.pdf | http://www.insure.com/health-insurance-faq/deductible-after-lose-health-insurance.html | http://khn.org/news/052113-michelle-andrews-on-shrinking-deductibles/ | http://employment-law.freeadvice.com/employment-law/pensions_benefits/deductible-payments-employer-health-plans-mid-year-swtich.htm | https://lisibroker.com/members/product/pdf/LISI_Carriers_DeductibleCreditCarryover.pdf

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