Open Enrollment 101

December 1, 2015

Does open enrollment seem to sneak up on you every year?  Your human resources department sends out an email announcing the enrollment period and before you know it you’re scrambling to make your selections on the last day before the open enrollment deadline.

You’re going to be stuck with most of these choices for a whole year – why not take a little extra time to research your options ahead of time so you can understand your potential choices and make the best decision for you?

Health Insurance

As the cost of health insurance goes up, the plans that employers offer are charging higher premiums for lower deductibles.  For some people, it seems like your premiums go up every year.  Of course, one way to lower those insurance premiums is to choose a plan with higher deductibles.

Something that’s time consuming but worth your while is to look back at how much you spent on health care last year (insurance premiums, out of pocket, and co-pays).  Think ahead to the coming year and try to approximate whether you’ll see the doctor less, the same, or more.  I agree, it’s an inexact way of doing things, but it’s better than simply guessing.

One you have a feeling of how much you think you’ll spend you can run scenarios with the premiums/deductibles offered by your health insurance plan to see which will best meet your projected healthcare spending.

If you anticipate few healthcare costs or if your premiums are insanely expensive, one option you might have is a High Deductible Health Plan coupled with a Health Savings Accounts

Health Savings Account vs Flexible Spending Account

The good thing about a Health Savings Account (HSA) is that it lets you save money for health care expenses pre-tax without having to worry about losing the cash you set aside, which could happen with a Flexible Spending Account (FSA).

If you’re not familiar with an FSA, it’s also an account you can contribute to pre-tax for health care expenses. The main downside to an FSA is that any money you contribute but don’t use by the end of the year is forfeit.

So compared to an FSA, an HSA seems like a no-brainer – until you find out that in order to qualify for the HSA you have to enroll in a high deductible health plan (HDHP).  An HDHP can end up saving you a lot of money if your health care expenses are low year after year. These plans usually have pretty low premiums so if you never go to the doctor then all you’re out are the costs of your monthly health insurance rates.

However, the deductibles in a HDHP can be very high, so if you end up with a year full of doctor’s visits then you may be paying many thousands of dollars before your deductibles kick in.  Since an HSA does let you roll your contributions over from year to year, if you’ve been part of an HDHP with an associated HSA, then you may have the money built up to cover those expenses.

Here’s a chart with more of a comparison of the details of a Health Savings Account vs Flexible Spending Account.

Other Insurance

Life Insurance

Buying life insurance through your employer can be an affordable way to get a good policy for a decent price.  Some employers will offer a base amount of life insurance at no charge but then allow you to buy additional insurance for just a few bucks a month. Sometimes for the first or second supplemental level of life insurance they won’t require a medical exam, so it can be a cheap and easy way to add life insurance.

Obviously, one of the main downsides of buying life insurance through your work is that if you lose your job you could risk losing your insurance.  Research the policy to see if you can keep it in the event your leave your employer.  It’s also smart to research the company offering the life insurance; you can go through the rating service from A.M. Best  to see how the insurer stacks up.

Disability Insurance

There are some benefits to buying a separate disability insurance policy outside of your employer’s group policy.  One obvious benefit of going with an individual policy is that you get to keep your same policy and coverage if you get a new job.

Or if you’re currently receiving disability from some other source, such as Social Security Disability Insurance, an individual policy is less likely to reduce your benefits as might happen with a group policy through work.

On the other hand, you will probably pay more for a separate policy so buying short term or long term disability through your employer is likely cheaper.

Prescription Drug Coverage

If you or your family spends a lot on prescriptions, make sure you factor those needs in when evaluating your health insurance. A plan that has a co-pay of $5 to $10 for generic drugs may be tempting but what will be the cost if find yourself needing a brand name medicine?

Many insurance plans offer a tiered pricing system when it comes to pharmaceuticals, be sure you understand the different levels and go with the one that makes the most sense based on your past and projected future medicine needs.  There can also differences in price depending on how you get your medicine, doing mail order through your prescription service vs picking it up at any random pharmacy.  Make sure you understand how the process works so you can plan ahead and save money on recurring prescription needs.

Ben

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Ben

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn’t like the other kids… His addiction to personal finance has paid off for his family and now he’s helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.


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