What does my client need to know about plan-year vs. calendar-year plan administration?
As an employer, you have several important decisions to make when implementing a health plan. One area where we sometimes see confusion is calendar-year versus plan-year administration. Selection of calendar-year or plan-year administration controls how HealthPartners applies:-
Deductibles
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Out-of-pocket maximums
- Hour limits
- Visit limits
What is the difference between calendar-year and plan-year?
Calendar-year administration: Administration is based on a calendar year (January 1 through December 31), regardless of the plan effective date. The deductible, out-of-pocket maximum, etc., will begin on January 1 regardless of when the plan renews. For example, a plan that begins July 1, 2008, will have a deductible and out-of-pocket maximum that will start over on January 1, 2009.
Plan-year administration: The plan effective date and the administration always match (July 1, 2008, through June 30, 2009). For example the deductible and out-of-pocket maximum for a plan that begins July 1, 2008, will not start over on January 1, 2009.
What else do I need to consider when selecting a plan?
Traditional Plans: Most large employers choose calendar-year administration to match the corresponding fiscal year. It's also easiest for your employees to understand.
HRA Plans: Plan-year administration is required on health reimbursement account plans. The funding of the HRA must be on the same schedule as the health plan meters.
HSA Plans: Health savings account contribution limits are calculated on a calendar-year tax basis. The high-deductible health plan (HDHP) associated with the HSA can be calendar-year or plan-year, but is most easily understood by employees when the HDHP matches the HSA calendar tax year.
FSA: Flexible spending accounts are typically administered on a calendar-year basis to match the corresponding calendar tax year. Elections are most easily planned for when plan dates match those of the medical plan. You may choose plan-year administration to align the FSA with a medical plan that renews off calendar year.
Notes:-
For dual-option situations, both plans must match – both plan-year or both calendar-year.
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If the group maintains calendar-year, members will keep any deductible and out-of-pocket they have already incurred since the first of the year – even if they move from a traditional plan to an Empower plan. For example, if an employee was on a 15-100 plan and had paid out $300 toward office visits, Rx copays and an ER visit and then moves to the Empower 1100-100, they will only have to meet $800 the remainder of 2008 toward the deductible.
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If they move to plan-year, the rate year and the plan benefits match.
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If they move to plan year, they will lose any of the out-of-pocket they have already met and all meters will start over at $0.00 on their renewal date (i.e. 8/1/08) and run through the end of the contract year (i.e. 7/31/09)
