Open enrollment season is upon us, so it’s time to make some smart decisions about your workplace benefits—including your healthcare options.
Many employers are shifting healthcare costs to workers. So it’s important to know your options in order to not only select the best healthcare package for your family, but to save money as well.
Here are four financial tips to help you during open enrollment season.
1. Think beyond your routine health insurance
When most of us evaluate our healthcare benefits, we mainly consider what’s covered and what’s not, in terms of routine coverage like annual checkups, health screenings, dental coverage or eye exams.
But what if you’re planning to have major surgery next year or perhaps to have a baby? Then picking the right plan now can save you thousands of dollars.
Also, even though the emphasis is on healthcare coverage, open enrollment season is the time many companies are now emphasizing a slew of other on-the-job benefits, including:
- gym membership
- commuting rebates
- employee discounts
- tuition reimbursement plans
Some of these options may require you to say yes or no to the benefit being offered—and you may have to do it during the open enrollment period. Don’t forget to consider these benefits when examining your overall package—especially if you’re thinking about a new job offer or a promotion at your current job.
2. Don’t Forget About “Use it or Lose it” Features
Most healthcare plans come into two categories: FSA offerings or HSA plans.
The Flexible Spending Account, or FSA plan, is a “use it or lose it” type of offering—meaning any benefits you haven’t used up or taken advantage of by December 31 are typically gone.
An HSA, or Health Savings Account, doesn’t work that way. By law, a Health Savings Account must be linked to a high-deductible health insurance plan. In 2014, the minimum deductible for single coverage is $1,250; for family coverage, the minimum deductible is $2,500.
Those with an HSA can choose to save up to $3,300 for an individual and $6,550 for a family. (HSA holders who are 55 and above can sock away an extra $1,000 which means $4,300 for an individual and $7,550 for a family.) All these contributions are 100% tax deductible from gross income.
Premiums for high-deductible plans are usually lower than those for traditional plans, which may explain the growth in HSA plans.
About a decade ago, back in 2005, there were just one million people enrolled in HSAs. Today, there nearly 12 million HSA accounts holding $22.8 billion, according to a 2014 research report from Devenir.
Even though they function differently, both FSA plans and HSA plans are tax-advantaged because they let you save money tax free for eligible healthcare expenses. You then get reimbursed for those healthcare costs.
Just make sure you comply with the laws that govern these plans.
For example, under Affordable Care Act rules, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change doesn’t affect insulin, even if purchased without a prescription, or expenses such as medical devices, eyeglasses, contact lenses, co-pays, and deductibles.
This means that if you use funds from your FSA or HSA to reimburse the cost of over-the-counter prescriptions and you don’t have a prescription, your reimbursement amount will be considered gross income and it will subjected to an additional tax of 20%.
Likewise, nonmedical withdrawals from your health savings account are taxable income and subject to a 20% tax penalty.
3. You can’t “undo” a bad decision for a year
During open enrollment season, one question people often ask is: Can I later change my mind and switch healthcare plans? Unfortunately, the answer is no. At least, you can’t change your mind in the near-term.
You’re usually forced to stick with the same plan until the next open enrollment season, unless you experience a change in your family circumstances, such as getting married or divorced or having a baby, naturally or via adoption.
4. You may not need a “Cadillac” policy
People who worry a lot about health issues sometimes tend to want “the best policy that money can buy.” If you have a family history of certain diseases, conditions or illnesses, or if people in your family tend to get sick or injured a lot, it may be worth it to consider a comprehensive policy with a lot of bells and whistles.
But if your and your loved ones are in relatively good health, you probably don’t need a so-called “Cadillac” policy offering top of the line benefits and features.
To get the best healthcare policy at the most reasonable price, consider three factors: price, coverage and ease of use. While affordability matters greatly, don’t let the monthly premiums be the sole criteria.
Also, look at the prescription drug costs on a plan, the deductible you have to pay before benefits kick in, as well as overall limits on how much you can be expected to shell out in any given year.
Regarding your coverage, find out what services and procedures are included—as well as those that are excluded before picking a plan. Don’t make the mistake of picking a policy with rock-bottom pricing only to later discover that it only covers major injuries or catastrophic illnesses.
Once you feel comfortable with a health plans pricing and level of coverage, make sure you also find out the process for submitting claims, whether or not toll-free phone help and online assistance is available from a health insurer, as well as how easy it is to go to specialists or consult doctors of your choice, both in and out of the healthcare network.