3 Ways To Make the Most of Open Enrollment
Dear Rich Lifer,
Earlier this week, we dove into a topic on the forefront of everyone’s mind — health insurance.
We know that with thousands out of work due to coronavirus, finding ways to get affordable health insurance has been more dire than ever.
Hopefully, our article shed a helpful light on how to get insurance and prepare for open enrollment, which starts November 1.
If you are someone who has been lucky enough to keep their job and their insurance throughout the pandemic, you may think that open enrollment for health insurance has little to do with you.
This is where you would be incorrect.
Every year around this time, companies offer their employees the chance to update their benefit preferences.
In other years, changes may have been minimal, but not this year.
Christina Gamache, a financial adviser with Audax Wealth Management, states,
“Open enrollment for a lot of people is typically something that is on autopilot. This year is different. A person’s financial situation at the beginning of 2020 likely looks very different than it does today, and it may look even more different from 2021.”
Additionally, your employer’s plan options might have changed. There could be added costs, or more positively, increased coverage for things such as mental health or childcare.
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This year more than ever, you need to check on whether your insurance offerings have changed and revise your benefits to better suit your current situation.
1. Be Proactive, Not Reactive
Think about your upcoming year… Do you expect to have any life changes that would result in high healthcare costs?
Have you developed a chronic illness? Do you anticipate having lots of prescriptions? Maybe you are trying to have a child or have recently become pregnant.
In this case, you may want to opt for a plan with higher premiums but lower deductibles.
If you have not experienced any change in your wellness and don’t anticipate big costs, then a high-deductible plan with lower premiums may be a better fit.
As many of us have experienced during COVID, a lot of doctors have switched to virtual care or telehealth to treat basic illnesses. Check on your employer’s coverage of this type of “doctor’s visit” which is usually much more affordable than doing an in-person visit.
If you are married, make sure you look at your spouse’s plan as well as your own. Just because you took advantage of your employer’s plan last year does not mean you have to continue coverage with them, especially if your spouse has better coverage.
Misty Guinn, director of benefits and wellness at Benefitfocus, a benefits management provider, also suggests asking yourself the question, “How much can I pay when I get care?”
Some people are fine with paying higher premiums, knowing they will pay less for visits to the doctor. Others, especially younger people who have fewer health issues, would rather save on premiums.
2. Invest Wisely
If you fall into this category, a smart idea would be to invest the monetary difference in a retirement account or a Health Savings Account (HSA).
With an HSA, you’re allowed to put pre-tax money into a separate account that can be used for paying for medical expenses.
Besides the tax benefits — pre-tax contributions, tax-free growth and tax-free distributions for eligible expenses — money in your HSA account can be invested and used as an additional retirement vehicle.
However, as we briefly mentioned above, in order to be eligible for an HSA, you will need to have a high-deductible health plan (HDHP) of more than $1,350 as an individual or more than $2,700 as a family. Additionally, you cannot open an HSA if you’re eligible for Medicare or claimed as a dependent on another person’s tax return.
If your employer does offer a high deductible plan with an HSA, check to see if they also offer employer contributions to match the money you’re saving in your account.
3. Know The Difference Between HSA vs. FSA
While we are on the subject of HSAs, you may be asking yourself,
“Wait, is an HSA different from an FSA?”
The answer is yes. An FSA — flexible spending account — is controlled by your employer and is less flexible.
Unlike an HSA, funds from an FSA must be used by the end of the year or they are lost. They don’t roll over like in an HSA.
Many families felt stuck midway through 2020 with pre-tax funds they saved in a child dependent care Flexible Spending Account (FSA) that could not be used because there were no childcare services available.
FSA contributions can also only be changed during open enrollment, which is why it’s so important right now to make sure you are contributing the right amount to this type of savings account.
And while we are on the subject of making the most of your savings, take a look at how your money spending habits have changed due to coronavirus.
According to Eric Levy, executive vice president of AIG Retirement Services,
“Overall, people are spending less on travel, vacations and going out to eat. I’d encourage people to find that as an opportunity to increase their contributions into a retirement fund.”
Even though 401(k) contributions can be adjusted throughout the year, open enrollment is a great time to take a broader look at your personal balance sheet and adjust accordingly.
It is also important to note that, in most cases, you cannot have an FSA and an HSA, so make sure you research your options and pick the savings account that makes the most sense for your current situation.
Try to think of open enrollment as an opportunity to get the best possible deal on your insurance. We know it can seem daunting, but if you take our tips into account we are sure you will find the best plan at the best cost!
To a richer life,
The Rich Life Roadmap Team