In many organizations with group health insurance, the plan year starts on January 1 and ends on December 31. But are there any particular advantages to having group health plans tied to the calendar year?
Group health plans are designed for employers and their employees, but there are lots of considerations to keep in mind when deciding on the best kind of plan to have. When a company is looking to provide health benefits, the design of its benefit plan may be influenced by any of the following:
- tax considerations
- accounting practices
- human resources procedures
All of those things usually coincide with the calendar year, which means that it makes it much easier for both employers and employees to have an insurance plan that works within the same timeframe.
A Deeper Dive
The following four points give more in-depth information into why having a group health plans tied to the calendar year might be beneficial:
Administrative simplicity and cost savings for your company.
In many cases, it’s simpler from an administration standpoint to align your plan year with the calendar year. When the majority of your employees return from their annual holiday breaks, you can kick off the next benefit year – and ensure that they begin their new plan year with a clean slate.
Tax considerations for your company.
The start of the new year provides employers the opportunity to reassess their benefit offerings for the coming year and ensure that these changes are made in the way most advantageous to employees.
For example, if employers want to make changes around eligibility requirements (such as increasing the number of work hours required for eligibility), they can do so without worrying about employees having already met those requirements before the policy change.
Ease of compliance with state and federal laws.
A number of states have laws that require employers to participate in an annual open enrollment process, typically between November 1 and December 15. Other states require employers to offer a certain number of days for an employee’s annual leave – which would align with the calendar year as well.
The Affordable Care Act (ACA) has imposed additional requirements on health insurance providers and employers who offer group health insurance benefits to their employees. Among the ACA’s requirements is a mandate that group health plans allow employees to add or remove dependents during an annual open enrollment period, which aligns with the calendar year as well.
Maintaining the status quo.
Since any changes to a health plan that negatively impact employees must be communicated to them during the open enrollment period (i.e., 60 days prior to the start of a new plan year), this can be an important thing to consider when aligning your group health benefits with the calendar year.
Bottom Line
When it comes to group health plans, many employers and employees find that having a plan year aligned with the calendar year provides a number of advantages and simplifications. This can include tax considerations for the company and fewer administration costs, not to mention fewer headaches for employees when it comes to understanding those benefit packages.
If you’re interested in learning more about the benefits of aligning your group health plan with the calendar year, contact Bethany Insurance for more information. We can help you make the best decision for your business and employees.
