How to choose the best open enrollment options
TERRY SAVAGE firstname.lastname@example.org September 28, 2011 2:08PM
How you can pick Terry’s brain
In this column, I’ll respond to your most frequently asked questions regularly. Of course, you always can submit individual questions on my Sun-Times blog, reached on the home page at www.TerrySavage.com.
Updated: May 3, 2013 12:15PM
Q. My company has just given me a bunch of forms about “open enrollment.” I have no idea what to do about all these options. Where do I go for help?
A. I’m glad you asked that question, because you’re not alone. Whatever decisions you make now will impact your health care options and your finances for an entire year. Smart decisions could save you a lot of money.
If you simply “stick with what you did last year” you could miss out on new plan offerings, or miss out on benefits like pre-tax Flexible Spending Accounts or dependent care plans that require re-enrollment every year. So it’s up to you to do your homework and ask your company human resources director to explain your options.
It can be challenging to make comparisons, so here’s how to get started:
Read the basic insurance choices. They may include an HMO, a PPO, a traditional fee-for-service coverage, or a high-deductible plan, which may or may not be combined with a Health Savings Account. The HMO and PPO provide incentives (or penalties) for using certain doctors. Make sure the doctors you value are included in the plan of your choice. If you choose a High Deductible Plan that has lower premiums, consider whether you can afford to pay the deductible amount if needed, along with the pre-tax Health Savings account contributions.
Remember, you’re comparing not only total cost and monthly premiums, but also the kind of access to care that you think your family might need.
Consider the Health Savings Account option. The plan allows you to set aside a maximum of $3,100 for individuals, and $6,250 for families on a pre-tax basis in 2012, to pay for qualified medical expenses. The idea is that you’ll spend that deductible amount wisely — because it’s your money.
Any money that you do not use this year can be saved for future years to pay for those expenses. This type of plan is combined with a high-deductible health insurance policy. In 2012, there will be a minimum deductible of $1,200 for individuals and $2,400 for families. Federal law limits the maximum out-of-pocket amount for self-only coverage to $6,050 and $12,100 for families.
Understand Flexible Spending options. Each company can set up its own flexible spending plan — allowing you to set the amount that will be deducted from your paycheck to be used for allowed health care or dependent day care expenses during the year. But you must spend the money during the year, or it will be lost. In 2013, there will be a Health FSA cap of $2,500, so if you anticipate surgery such as Lasix or similar large medical expenses, schedule them for 2012 — and pay for them on a pre-tax basis with your contribution to the Flexible Spending Account.
Check the impact of the Affordable Care Act (Obama-care). The law mandates that all preventive care, ranging from annual checkups to mammograms and pap smears, be fully covered, and not subject to the plan deductible — except for plans that are “grandfathered” under the old rules. So, if you’re younger and don’t expect to be having a big medical expense except for your annual checkup, you can save a lot of money with a high-deductible plan that will cover true emergencies and accidents that could run up a huge bill. High-deductible plans may be offered, even if they don’t have a Health Savings Plan component. Ask about them.
Finally, don’t automatically renew your plan, without rethinking your need for coverage — and balancing the costs versus the benefits. Go to www.SaveSmartSpendHealthy.com, a website created by benefits consultants WageWorks to explain these issues.
There is no one right answer for everyone. But it is well worth your time to read the offerings, ask questions, and do some comparisons. Done right, these decisions could save you a lot of money. And that’s The Savage Truth.
Terry Savage is a registered investment adviser