It’s that time again. Open enrollment for health insurance is fast approaching. Employers are putting together information for their employees to sift through and come up with a plan right for them. If you don’t have employer sponsored health insurance, then you will be looking for coverage on the many Affordable Care Act (ACA) exchanges, or through Healthcare.gov. No matter how you get your health insurance, open enrollment is a great time to weigh all of your options and make sure you are paying for what you need. It’s also a great time to look into healthcare accounts to assist with your expenses. Here are some tips to help you navigate through open enrollment.
Employer Sponsored Health Plans
Most employees who carry insurance provided by their employer typically stick with the status quo. They don’t change much and accept what their employer provides. Many employers actually give their employees a choice of plans depending on their needs. They also provide a wealth of information about their plans before open enrollment.
This is a time when you should read through all of the material. Make sure you are paying for what you want and need. Open enrollment allows you to add and remove services without an issue. The only other time you can change your services is if you have a qualifying event, such as having a child.
Some plans give you discounts on eye visits or points for diet and exercise. Read up on these reward programs and see if you want to join. Each plan may provide different reward benefits if they have them at all.
If your employer provides you with access to a flexible spending account (FSA), check to see if this would be a good idea financially. FSAs help lower your taxable income, but you need to make sure you utilize all the money in the account before the year ends. Your employer sets aside a set amount of money from your paycheck to fund the FSA. You have to keep detailed receipts of your health care expenses and then use the FSA to pay back those funds. This enables you to save according to your tax bracket. Once the year ends, if your FSA has funds left over, then those will be lost. You can’t use them and you don’t get them back.
Health Savings Plans
With the expansion of the ACA, people have been going to the state and federal exchanges to see what type of health insurance they can get. Many find the only viable option is the high-deductible plans. These are typically the silver and bronze plans on Healthcare.gov. With these plans, people have lower monthly premiums, but a high annual deductible. Currently, out-of-pocket costs are capped at $6,350 for individuals and $12,700 for families per year.
These plans are reserved for those who don’t have chronic illnesses and don’t need to see a doctor on a regular basis. These are also known as catastrophic event plans.
One way to reduce your health care costs is to enroll in a health savings account (HSA). These plans are only allowed to be paired with high-deductible plans. An HSA is a tax-advantaged medical savings account. You fund your account and then use those funds for medical expenses. Your deposits into the account are not federally taxed. These accounts have investments tied to them to allow them to grow over time. Unlike flexible spending accounts, you can roll over the balance each year.
Your withdrawals are not taxed when used for qualified medical expenses. New rules have prohibited over-the-counter drugs to be covered without a prescription. If you withdraw for any non-medical related expense, then there is a 20% tax penalty.
What is Right for You?
Did you know some employers will pay you to drop their insurance coverage? There are some employers who will pay you a “breakup” fee to get your own health insurance or get coverage from a spouse. This open enrollment period is a perfect time to do that. The question is what is right for you?
If you are on an employer coverage plan, then check all of your benefits in detail. See what you are paying for in the plan. Head over to Healthcare.gov or your state’s exchange and see what type of plan you can get. Don’t just compare costs; compare coverages, deductibles, and provider networks. Once you have all the information, it will be much easier to decide what works for you.
If you have an HSA and want to keep it, yet move onto a new plan from the ACA, then you will need to see if your plan allows active contribution to an HSA or any other rules regarding the use of an HSA. If you end up going with a lower deductible plan, then you will no longer be allowed to fund your HSA. You can still use the funds that are there, but can’t add any additional funds.
While having an HSA is great for some, it is not for everyone. The main reason is you have to be able to fund your HSA. If you struggle living paycheck to paycheck, then taking money out of your budget and having it stored in an HSA might not be worth it. This is especially true if you can’t lower your monthly health plan premiums through a new plan.
Don’t take the open enrollment time for granted. Make sure you understand how long it lasts and what your options are. Gather as much information as you can, and make sure you understand the financial ramifications of one plan over another. You don’t want to be stuck with a plan that doesn’t provide you with the benefits you need.
By: Grayson Bell, Staff Writer