WHAT IS 'Benefit Period'

A benefit period is the length of time during which a benefit is paid. This can involve a government benefit program such as Medicare, or payment from an insurance policy, such as health or disability insurance. The benefit period is defined in each program or policy’s guidelines.

BREAKING DOWN 'Benefit Period'

Benefit periods can vary significantly. For example, private disability insurance policies typically offer a range of benefit periods, from as short as two years to until the insured reaches age 67. Since baby boomers will reach full Social Security eligibility at age 66 or 66-1/2, a disability policy extending to age 67 provides income replacement until retirement. By contrast, a policy with a two-year benefit period will only cover your lost income for two years.

The benefit period of an insurance policy impacts the price of the premium, since an insurer is on the hook for greater risk when the period is longer. On the other hand, longer disability periods are less common: the average disabled worker is out for 3.2 years. Insurers factor in these variables when quoting rates and benefit periods. Another factor in the premium price is the elimination period, which is the amount of time before the benefit period kicks in. Some disability policies start paying after one month of lost income, while others might have an elimination period of two years. In that case it is possible to buy a second policy with a benefit period of two years, to cover the elimination gap.

The Medicare Benefit Period

In the context of Medicare, the benefit period begins the day an insured is admitted to a hospital or skilled nursing facility, or SNF, and ends when the insured has not received any care for 60 days in a row. The benefit period is important because it determines when, and how much, the insured person must pay in deductibles or co-pays.

For example, say you enter the hospital on August 1 and leave on August 5, spending four days in the hospital. You pay your deductible of $1,340, the 2018 amount. Then you need to go back to the hospital on September 6, for 10 more days. You don’t need to pay another deductible because you have spent only a total of 14 days in the hospital out of your 60-day benefit period.

Moreover, you also owe no co-payment of $335 per day in 2018 because co-payments don’t kick in until after the 60-day benefit period. However, if more than 60 days pass between hospital stays then a new benefit period begins, requiring a new deductible payment and re-setting the clock for daily co-payments after day 60 in the hospital.

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