The beginning of the year brings challenges for many healthcare patients and nearly all healthcare providers. The issues are related to the resetting of insurance deductibles. Many patients must again pay out-of-pocket for medical services that insurance completely covered only a few weeks prior. And that can mean canceled or rescheduled appointments.
While the financial challenges that burden the insured are mostly unavoidable, there are some ways physicians and medical billing teams can prepare for the onslaught of canceled appointments and challenging collections. Many providers take this time to focus on collections services and implement new processes that make it easier for patients to pay. You may find this is an excellent opportunity to talk to your patients about treatment and payment options, which may result in a more positive patient experience and an easier collection process.
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When Do Insurance Deductible Reset?
Most insurance deductibles reset on January 1. This is known as a calendar year deductible reset. Sometimes patients will have plan year deductible resets, which means the deductible resets on the date the employer renews the health plan. This is rare, but plan year deductible resets could fall at any time during the year.
Insurance Deductible Basics
Before determining the best way for your practice to tackle deductible resets, it’s important to understand how deductibles work. Here are some basics about insurance deductibles and what patients face at the start of each year.
What Is a Deductible?
A health insurance deductible is the amount the insured patient must pay for covered healthcare services before the insurance plan starts to pay for any services. Premiums and copays generally do not count towards the deductible.
When a deductible resets to $0, the patient must start paying again for all healthcare services until they reach the deductible limit.
What’s the Difference Between Individual and Family Deductibles?
- An individual deductible is a separate per-person deductible. It is a fixed amount of money each family member must spend on covered healthcare services before insurance will start paying for his or her services.
- A family deductible is a fixed amount the entire family must pay before insurance starts paying expenses for the family. The family deductible is an accumulation of all individual family members’ out-of-pocket healthcare expenses.
Often, individually-purchased insurance plans that offer a lower monthly premium have higher deductibles, copays and coinsurance percentages. However, most insurance policies have an out-of-pocket maximum, which means there’s a limit on the amount a patient will pay for services before the insurance company covers services at 100%.
- A patient has a $500 individual deductible on a four-person family plan.
- $500 x 4 family members = $2,000 family deductible.
- A patient has a $1,250 individual out-of-pocket maximum on a four-person family plan.
- $1,250 x 4 family members = $5,000 out-of-pocket maximum.
What’s the Difference Between Deductibles and Out-Of-Pocket Maximums?
A deductible is an amount an insured patient must pay before the insurance plan starts chipping in for healthcare services. An out-of-pocket maximum is the highest amount a patient can pay toward healthcare services before the insurance company covers 100% of services.
Both deductibles and out-of-pocket maximums usually reset at the start of the year.
Do Copays Count Towards Deductibles?
What Is a Copay?
A copay is a fixed amount of money paid for a certain service. Your health insurance plan pays the rest of the cost. Deductibles are sometimes confused with copays, but the two are different.
With a copay, a patient must pay the specified amount for each appointment. For example, a patient’s plan may have a $50 copay for specialist office visits. On the other hand, the patient only pays a deductible once per year.
Usually, a copay does not count towards the annual deductible but does count toward the annual out-of-pocket maximum amount.
What Is Coinsurance?
Coinsurance is the portion a patient must pay for each covered healthcare service or prescription. Coinsurance is based on percentages and is applied to the out-of-pocket maximum. For example, a patient may have to pay for 20% of a covered service while the insurance plan pays 80%.
Health Insurance Deductible Example
An insurance policy states a patient must pay a 20% coinsurance for mental health outpatient office visits once they meet their deductible. In other words, after the patient hits the deductible, the insurance company will pay for 80% of covered services.
- If the patient has a $150 visit before they meet the deductible, the patient will pay $150 upfront.
- If the patient has met the deductible, the patient will pay for 20% of the cost of that visit.
- If the patient has already met the out-of-pocket maximum, the insurance company will cover 100% of the cost of the appointment and the patient pays $0 until the deductible resets.
Why Do Deductibles Keep Going Up?
A 2021 Kaiser Family Foundation (KFF) survey showed that deductibles have risen from $826 to $1,655 between 2009 and 2019. There are very few plans with deductibles between $250 – $500 and the number of people with employer-sponsored insurance with deductibles has increased from 63% to 82% in the past 10 years.
The increase in deductibles in recent years is due to more high deductible health plan (HDHP) offerings. Patients enroll in these policies because the monthly premiums are often lower. Meanwhile, employers offer HDHP to offset costs associated with lower-deductible plans.
What Is a High Deductible Plan?
A high deductible health plan (HDHP) is an insurance plan with a higher deductible than an average insurance plan. The Internal Revenue Service (IRS) sets the standards for a health insurance plan to qualify as an HDHP.
In 2022, the IRS defines a HDHP as a plan with an individual deductible of at least $1,400 and a family deductible of at least $2,800. Per the IRS, out-of-pocket maximums on HDHPs can’t be more than $7,050 for an individual or $14,100 for a family.
Patients with an HDHP also qualify for health savings accounts (HSA). These accounts allow patients to set aside pre-tax money to pay for qualified health expenses.
- A deductible is an amount an insured patient must pay before the insurance plan starts chipping in for healthcare services.
- Each insurance plan has an individual deductible and family deductible amount.
- Payments applied to the individual deductible count toward the family deductible.
- Family deductibles can be met without a member of a family plan meeting their individual deductible.
- High deductible health plans (HDHP) offer lower monthly premiums but higher individual and family deductibles. Patients with HDHPs can offset costs with pre-tax contributions to a health savings account (HSA).
- Once a patient meets a deductible, they may be required to pay a percentage of the cost of a covered service (coinsurance).
- Copays typically don’t count toward deductibles but do count toward out-of-pocket costs.
- Once a patient meets the out-of-pocket maximum, the insurance company will pay for 100% of covered services.
How to Plan for Deductibles Reset
When your patients’ insurance plans renew at the start of the year, your administration team must deliver updates to the patient and reverify coverage. It’s also a great time to implement new office policies for collections.
Here are some ways your team can prepare for the deductible reset at the start of the year and avoid patients canceling or rescheduling appointments.
- Enforce upfront collections and ask patients to pay an estimate before they receive services or treatment. Increasing collections can help offset costs of patients who are canceling or rescheduling appointments for later in the year.
- Offer payment plans to help patients with high-cost services while maintaining cash flow for your practice.
- Send patient estimates before the date of service (DOS). Patients are more likely to pay upfront and return to a practice if they understand their costs ahead of time.
- Ask patients if they have an HSA they can use to pay for services.
- Offer the option to move forward with higher-cost care in Q4 and explain the financial benefits.
- Send reminders for year-end appointments to avoid costly no-shows, which may have to delay appointments further once deductibles reset.
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What Else Can Your Medical Billing Team Do in Q1 to Improve Reimbursements?
- Review patients who are past due on preventive services or follow-ups. Most plans typically cover preventive services 100%, even before the patient meets the deductible.
- Review your electronic health records (EHR) and practice management (PM) software for new tools and issues. Schedule meetings with your vendors to be sure you’re getting the most from your EHR and PM systems. Ask if they have any Q1 advice.
- Attend insurance provider webinars or complete continuing education (CE). If you hold credentials that require you to complete a specific number of continuing education units (CEUs) per year, look for opportunities to get your training. These will help you stay on top of industry trends and keep up your credentials.
- Use the extra time to improve current workflows and identify previously missed opportunities. This may include exploring a tech-enabled medical billing service.
Kickstart a More Reliable Revenue Cycle
Whether you’re navigating your first Q1 or your 30th, Gentem can help. We’ve built a medical billing platform that’s backed by a team of revenue cycle experts who handle the end-to-end revenue cycle and billing process. Leveraging automation, data science, and the latest financial technologies, Gentem is able to increase cash flow while drastically reducing account receivable days and uncovering opportunities to increase revenue.
See how Gentem can bring some consistency to an otherwise unpredictable Q1. Sign up for a personalized demo today.
Editor’s note: This post was updated on Oct. 5, 2022. It was originally published on January 4, 2022.