As Open Enrollment for Insurance Draws Closer, It Pays to Understand Your Options
Given the rising cost of medical expenses, there’s a good chance that health care spending makes up a significant part of your household budget. During open enrollment for insurance, it’s important to evaluate your options and determine any shifts in coverage you will need for the upcoming year.
Determine Your Health Care Needs
As open enrollment season approaches, look back at your health care spending for the past year. How much are you paying for medications and doctor visits under your current plan? In addition to the ongoing health care costs included in your budget, consider new expenses you expect to incur, such as the birth of a child or a major surgery. Understanding what coverage you need, including prescription medications, will help you choose a plan with the right coverage.
Calculate and Compare Costs
During the open enrollment for insurance period, review all health plan options available to you and, if applicable, your spouse. Once you know the type of care you’ll need, determine how much getting that care will cost under all the plans you can choose from. Take into account expenses beyond the cost of insurance premiums, including out-of-pocket costs. Each time you visit the doctor, for example, you may be charged a copay. When you fill a prescription, you may be charged a percentage of the cost. While the amount you pay out of pocket could decrease if you change plans, you’ll most likely pay higher premiums. A simple spreadsheet can help you compare health care plan costs, or you can use an online calculator.
This information can help you answer essential questions around your available health plans. For example, is it better for one of you to carry the entire family’s medical coverage, or will maintaining individual plans make the most sense? Remember to factor in family deductibles, not just the premiums. For example, if you expect to spend $7,000 on medical costs but you need to hit two separate $5,000 family deductibles before a higher benefit level kicks in, it may save to cover everyone under the same plan.
Understand Health Plan Differences
In addition to looking at cost of coverage, you may want to compare the quality of health care plans with similar prices. Determine the differences in access to care and covered services, both in and out of network. If you’re comfortable with your existing providers, and they fall under an HMO, you may decide to choose this type of network. For more flexibility in choosing providers, other network types, such as a PPO, may work better for you.
Where to Look for Insurance
Most people receive health care insurance through their employer. If you’re self-employed, professional associations may offer a group insurance plan to members. Calling health insurance companies like your local Blue Cross will help you find information on nonemployer-sponsored plans and their prices. Also check the options available at HealthCare.gov.
Consider Adding an HSA
If you select a High Deductible Health Plan, consider opening a Health Savings Account* for additional tax savings. High Deductible plans offer lower premium payments, but participants must pay a higher amount of out-of-pocket costs before their maximum benefits kick in. Saving money in an HSA allows you to cover those out-of-pocket medical expenses with tax-free contributions. If you don’t use the entire savings balance, you can carry forward the amount saved to the next plan year.
Before making a final selection, prioritize your health care needs. If you want to stay with your current providers, ask if they accept the new insurance plan you’re considering. Other perks offered by some insurance plans, such as gym membership discounts, can be nice money-savers if you’re able to take advantage of them. Customer service or online access to claims information may be important if you’d like assistance when navigating the complexity of health care insurance.
If you’re thinking about switching your health care plan for the upcoming year, start your research well before open enrollment for insurance begins. Understanding what you need in a plan and how much you will spend for coverage should enable you to narrow your choices and find the plan that best fits your lifestyle in the upcoming year.
*See IRS Publication 502 for a detailed list of qualified medical expenses. HSA Checking Account provided by KeyBank Nation Association (KeyBank).