Navigating the waters of health insurance plans, flexible spending accounts (FSA) and deductibles can be confusing and present tough choices. Sure, your employer gives you a helpful booklet, the benefit options seem pretty straightforward, and you usually have a few weeks to submit your elections.
Nevertheless, here are some tips to keep in mind…
Tip 1: Open the benefits packet, read the packet
Employers go to great lengths to arm employees with helpful health benefits information. And the first step toward success is to block out some time to go through the materials.
“My number one piece of advice – read the material,” said Nan Maley, a registered nurse who founded her own eponymous workplace health and wellness firm. “It’s your care, it’s your money, make the right choices by weighing your options. People tend to know more about their car insurance than their health insurance.”
Indeed, according to a financial knowledge survey by MassMutual, 19 percent of people don’t know how much their health benefits cost them. Additionally, the research points out a correlation between benefit knowledge and benefit satisfaction. Eighty-nine percent of people who “know a lot about their benefits” said they’re satisfied versus 63 percent who “don’t know about benefits.”1
And most people apparently don’t spend a lot of time preparing for open enrollment. According to another recent study, 53 percent of people reported spending under an hour reviewing policy information during open enrollment.2
If you’ve read the materials and still have questions about the policies, get one-on-one guidance from your benefits department or attend information sessions if your employer offers them.
Tip 2: Measure your needs
You may think the more health insurance, the better. But you may be paying for coverage in your policy that you don’t need. Instead, make an assessment based on your family’s real health needs. “Last year should be your model,” said M. Tupper Hillard, vice president for national communications at The Segal Group, a benefits and human resources consulting firm.
If you or someone in your family has special needs, or a chronic health condition, plan for that. “But if you’re healthy, look at lower premium options,” Hillard continued. For instance, with a high-deductible health insurance plan, you’ll pay out of pocket until you reach your annual deductible (usually several thousand dollars), but your monthly premiums can be significantly lower than traditional health plans.
On the other hand, if you have ongoing health issues or school-age kids that will likely need doctor visits and maybe even an occasional emergency room visit, a plan that has higher monthly premiums but a lower overall deductible might be more cost effective.
“Ask yourself how much of the health care system you used in previous years,” Maley added. “Do you have ongoing medical needs? Summarize that. Make some assumptions for the coming year and do the financial calculations.”
Tip 3: Explore a flexible spending account
A flexible spending account allows you to set aside money tax free for qualifying expenses. Essentially, you can reduce your taxable income by paying for things you may be purchasing already. The IRS’ Publication 502 explains what’s covered and what’s not, and it includes a wide range of items, from medicines to crutches to acupuncture. Even some home improvements are covered if they’re medically necessary (think entrance ramps, handrails, and lowering or modifying kitchen cabinets or equipment).
If you’ve never participated in an FSA, Maley suggested giving it consideration this coming open enrollment.
“Even if you just put in the minimum, you’ll probably use at least that, lower your taxable income and see how easy an FSA account is to use,” she said.
To maximize the FSA benefit during open enrollment, plan for any health changes you see coming your way in the next year. If your child is getting braces soon, you can pay for them from an FSA .(There may be special requirements for your particular employment plan, so check with your benefits coordinator first.) Or if you have a baby on the way and will be nursing, you can stock up on supplies.The same goes for supplies for chronic issues like diabetes.
FSAs operate on a use-it-or-lose-it basis, however, where money put into the account is lost if it isn’t spent in the contributing year. So what if you find yourself on the wrong end of a use-it-or-lose-it FSA with time running out and a large balance? Treat yourself.
“I used the balance of my FSA recently to get prescription sunglasses and a mouth guard,” boasted Maley. Some FSA funds can also be used to purchase items like a well-stocked first-aid kit and a home blood pressure monitor, or enrollment in a smoking cessation program. There are many options, just check with your particular plan and IRS rules first.
Some employer plans may offer a grace period to spend unused funds from the FSA each year, provided the expense took place in the contributing year, or allow you to roll over $500 from one year to the next. It depends on the health plan specifics and, in some cases, must be directly requested.
Tip 4: Think strategically with a health savings account
Don’t think of a health insurance policy just as something you call upon when you’re sick. Think of it as a part of your financial wellness. A health savings account (HSA) allows you to contribute tax free into an account that rolls over year after year. If you’re young and/or healthy now, what you contribute this year likely won’t be used before year’s end. That money can be placed in a savings account or invested in a mutual fund, if available (options vary by employer).
Money goes in tax free, and comes out tax free if you use it for qualifying medical expenses (now, or later in retirement).
“There’s no use-it-or-lose-it provision, and there’s a tax advantage to using it in retirement to pay for medical expenses, including premiums,” said Hillard. “That way, you can use your 401(k) or other savings to pay for other things.”
Tip 5: Use wellness benefits
Even with the best health insurance plan or policies, you’ll likely still have co-pays for doctor’s visits.
“If your employer offers wellness benefits that can keep you healthier, you’ll cut the cost of your care, enjoy discounts, and be fitter,” said Hillard.
And since some employers have sliding premium rates based on wellness program participation, you can even reduce the cost of your annual fixed health care costs just by getting involved.
“Wellness is a conversation,” he said, “not just a gym discount. An ongoing conversation with the people who can guide you is a proactive approach that can improve your health.”
As you’re selecting next year’s health plan and reviewing employer-provided benefits, take the time to learn more about the wellness offerings that may be available through your employer. More and more employers are adopting policies and plans to promote wellness in the workplace.
Open enrollment can seem like an overwhelming or trivial task, but it’s an opportunity to take control of your health care choices. So you may want to commit a few hours the week your enrollment packet arrives to weigh your options. You only get one chance. The clock is ticking and as Maley noted, “it’s your responsibility for making the deadline, not your employer’s.”
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1 MassMutual, “2015 MassMutual Employee Benefits Security Study,” September 2015.
2 LIMRA, “Most Employees Spend Less Than an Hour to Decide Their Benefit Coverage for the Year,” October 5, 2015.