Health insurance checklist: How to choose

Key Points

  • Open enrollment offers a once-a-year opportunity to reevaluate your health care plan
  • Close to half of Americans don’t understand their health care benefits1
  • Pre-tax savings accounts can help pay for out-of-pocket expenses while lowering your overall taxes

As open-enrollment season begins, many Americans have an opportunity to reexamine their employer health care plans before signing up for 2019 coverage. However, most people simply sign up for the same plan they had the previous year. Many may find health insurance to be confusing: 48% of employees say they don’t understand their health benefits, according to new research from the Employee Benefit Research Institute.1

The lack of understanding isn’t surprising, considering only 39% of those surveyed say their employers offer education or advice about how their health insurance works.

Are you confident that you understand all of your employer health insurance options? Insurance options can be complicated, and you’ll typically need to weigh a variety of factors to make smart choices. Your coverage decisions most likely have the biggest impact on your budget, regardless of whether you are selecting a health plan through your employer’s open enrollment, purchasing insurance on your own or signing up for Medicare.

Here’s a checklist to refer to as you consider your 2019 benefit options.

Consider your needs and how much freedom you’ll have in choosing providers. You’ll also want to evaluate whether a high- or low-deductible plan is better for you based on your budget and medical needs. For instance, if you have a chronic condition, a past injury or young children, a low-deductible plan may be better for you. Ensure plan premiums, deductibles and copayments fit your budget.

Make sure your preferred doctors, specialists and hospitals are covered by the plan and are in network. If not, you may end up paying for extra out-of-network services. Since medical providers can change networks at any time, it’s a good idea to check before each appointment that the provider is still in network.

Reassess coverage if you are having a baby or if your adult children are turning 26 (after this age, adult children are commonly no longer eligible for coverage under their parents’ insurance). If you’re married, it’s a good idea to compare your health plan with that of your spouse. If one of your plans offers better coverage or if overall costs would be lower with family coverage options, you may want to consider consolidating benefits to one plan during open enrollment. For couples who have children and carry separate insurance, open enrollment can be an opportunity to reevaluate which parent’s plan offers better coverage for the kids.

Check to see whether your employer offers a mail-order program that delivers prescription refills directly to your home. These services often offer cost savings as well as convenience. If your prescription medication copays seem high, check with your doctor to see whether other options — such as generic brands — may work for you.

Investigate supplemental coverage for vision and dental options not covered by your health plan. Most employers offer separate dental insurance plans, and many offer supplemental vision plans that you can select during open enrollment.

Other options include purchasing private insurance. Individual insurance tends to be easier to qualify for but can be more expensive. You may also be able to buy into less costly group coverage, which is typically offered to small businesses but may also be open for individual enrollment depending on the insurance provider.

Consider opening a pre-tax health savings account (HSA) through your employer for a tax-advantaged way to help offset out-of-pocket medical costs. An HSA, which requires enrollment in a high-deductible health plan (HDHP), enables you to use pre-tax money to cover eligible health expenses such as copays and deductibles, prescriptions, and vision and dental expenses. Some forms of alternative medicine, such as acupuncture, also are covered.

HSA funds that aren’t spent in the calendar year can be rolled over each year. Employers may make contributions to HSAs but are not required to.

The funds in your HSA can typically be invested — often once you have $2,000 accumulated in savings. While some HSA providers allow you to invest in offerings like mutual funds or electronically traded funds, others offer only an FDIC-insured savings account.

Think about setting aside funds for health care expenses through a pre-tax flexible spending account (FSA) if you don’t have an HDHP. An FSA can be used for the same types of medical expenses as an HSA. The IRS has a complete list of eligible expenses here.

Unlike HSAs, leftover funds cannot be rolled over to the next year. That said, some employers offer a “grace period” of up to 2½ months to use the money in your FSA, or they may allow you to carry over up to $500 per year to use in the next year. Employers can make contributions to FSAs but are not required to. Unlike an HSA, the funds cannot be invested and will not accrue interest.

Annual contribution limits

  

If you own a business or work as consultant, you aren’t subject to an annual open-enrollment period — you can sign up for health insurance at any time. If you don’t have any employees, you can enroll in health coverage through the individual Health Insurance Marketplace. If your business has even one employee (other than yourself, a spouse, family member or owner), you may be able to use the Small Business Health Options Program (SHOP) Marketplace to offer coverage to yourself and your employees.

For those on Medicare wishing to make changes to their plan, the open-enrollment period for 2019 coverage — often referred to as the “annual election period”— runs from Oct. 15 to Dec. 7. If you or your parents are signing up for Medicare for the first time, the initial enrollment period is longer. It lasts seven months, including three months on either side of when you turn 65 as well as your birthday month.

We’re here to help

Overwhelmed by open enrollment and health plan choices? Your advisor can help you determine how to balance benefits, supplemental coverage needs and savings options with your overall financial and health planning goals. Open enrollment is also a great time to discuss other employer benefits — such as 401(k), pension or other IRA options — with your advisor.

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