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It’s that time of year again: the crackle of dried leaves underfoot, a crisp bite in the air, and pumpkin spice everything on menus. That’s right: it’s open enrollment season for health insurance.
If that last line made the happy images of autumn in your head dissolve into a scene of paperwork, calculators, and head-scratching, you’re not alone. Choosing a health insurance plan isn’t nearly as enjoyable as leaf peeping, bonfires, and pumpkin carving. But there are good reasons to “lean in” to the process.
Look at it this way: you wouldn’t just take 7.6 percent of your annual income and throw it in the air without paying attention to where it was going. Well, your employer pays about 7.6 percent of your total compensation in the form of health benefits—so it makes sense to spend that compensation as wisely as possible.
In other words, exercising a little extra care during open enrollment can yield benefits (no pun intended) for the year to come. And given the uncertain health landscape in which we’ve all been operating, it makes good sense to ensure your health coverage is just as you need it to be. Avoid these mistakes, and you’ll be well on your way.
Open Enrollment Mistake #1: Defaulting to the Health Insurance Plan You Had Last Year
One way to avoid the tedium of sifting through health care options and trying to compare apples to oranges is to simply do nothing. As the old proverb goes, “No choice is also a choice.” By doing nothing, your employer will most likely keep you in the health insurance plan you chose last year. That might be fine, but it also might be less than ideal.
The pricing of the plan you had last year may have changed. So might the details of your coverage. Your employer may also have added a new option that would serve you better than the previous year’s plan. Using a recent pay stub and an explanation of your current benefits, weigh your costs and current benefits against what other options might offer for the upcoming plan year.
If you can, create a spreadsheet with columns for premiums, deductibles, co-insurance, co-payments, out-of-pocket maximums and prescription drug benefits so that you compare “apples to apples” across all possible options. You might still choose your existing plan, but you’ll be doing it on purpose, not by default.
Open Enrollment Mistake #2: Ignoring Your Spouse’s Coverage Options
If you and your spouse are both eligible for health insurance through your employers, the decision-making process becomes a bit more complex. If you elect coverage through your spouse, see if your own employer is willing to offer you additional compensation for forgoing health insurance coverage through your company (remember, your health coverage is probably around 7.6 percent of your compensation).
Of course, you don’t just want to consider whether your spouse’s plan offers a lower premium. Go back to your spreadsheet and compare the value you get for your premium dollar. Often, the lowest premiums offer the fewest benefits.
Of course, you don’t just want to consider whether your spouse’s plan offers a lower premium. Go back to your spreadsheet and compare the value you get for your premium dollar. Often, the lowest premiums offer the fewest benefits.
And take a moment to bask in your good fortune: nearly half of Americans are not covered by health insurance offered by an employer, so to have two options for employer-sponsored coverage is a great advantage.
Open Enrollment Mistake #3: Getting Too Much (or Too Little) Coverage
Some medical needs are unpredictable: a year ago, nobody imagined they would be spending a month in the hospital with COVID-19. But by and large, you can come up with a pretty close approximation of what your family will spend on health care. Consider everyone’s general health, any existing conditions, how often your kids tend to end up at urgent care or the ER for sprains and stitches, etc.
Depending on your needs, it may be best to go with a high-deductible plan, which offers lower premiums, or a lower-deductible plan with a higher premium. If someone in your family has predictable and significant medical expenses (like a cancer survivor who must go for follow-up scans on a regular basis), and you are likely to meet out-of-pocket maximums, consider that your share of costs after those maximums are met will be lower.
Open Enrollment Mistake #4: Ignoring Tax Benefits of Health Care Options
Another reason to consider a high-deductible health care plan is that having such a plan may make you eligible to contribute to a Health Savings Account (HSA). An HSA allows a family to save up to $7000 with pre-tax dollars to use toward deductibles. Singles can save up to $3,500, and those 55 and older can add $1,000 in “catch-up” funds.
If you need the money in your HSA to pay deductibles for your health care, it’s there. But if you don’t need it, you can roll it over. Unlike Flexible Spending Accounts (FSA), HSAs are not “use it or lose it.” Plus, funds in your HSA grow tax-free over time, and withdrawals may be tax-free, depending on what you use them for.
Open Enrollment Mistake #5: Clinging to Your Plan for the Wrong Reasons
Many people resist switching health care plans because they don’t want the primary doctor they like to suddenly become “out of network’ with a different plan. That’s a relevant consideration, but it’s not the only one. For instance, if you have a medical condition that requires you to see a specialist, it may be more important to make sure that the specialist is in your network.
Other considerations are whether the plan you have (or the one you’re thinking about switching to) covers your regular medications. Some plans require you to use a generic drug if it’s available; are you comfortable with that? In the end, these issues may affect your day-to-day life more than your primary care physician.
You may not be able to get everything you want in a health care plan, but by taking the time to carefully evaluate your options, you can make the most out of this slice of your compensation. If you have further questions about open enrollment and how it affects your finances, please contact our law office to schedule a consultation.