It’s Open Enrollment time in corporations across America, and if your health insurance is a benefit of your employment, chances are you are wading through through this sea right now. Open enrollment refers to the time that employees can make changes to their employer-provided health care and other benefits. It typically happens 30-60 days before the new benefit year starts, which is usually January 1.
First, let me say that I’ve never actually had health benefits through my own employment, it’s my spouse, Mr. Sally J, who’s worked for corporate-type places most of his adult life. Although working for the man has its down points, and every year these benefits cost us more and his employer less, I’m not complaining. I know we’re fortunate to have access to semi-affordable health care. But I digress.
During open enrollment, you may have an HR person contact you directly, or you may just get email reminders to go through an online process. You’ll be selecting your health care coverage, and health care spending or savings account, as well as dependent care where applicable. You may also be offered life and/or disability insurance. Today I’m covering healthcare, later this week part two will cover dependent care and other insurances.
Your employer may offer one or more health insurance plans. There may be an HMO option, a PPO option or a high-deductible option. When we walked through Mr. Sally J’s plan this weekend, the company spelled out what kind of payroll deduction each plan would require, based on a single insured, a +1, or a +2 or more. Pro tip: Check to see if the math that’s being presented is based on monthly costs, annual costs or per pay-period costs.
From there, you’ll see if a few numbers- you’ll see Premium Cost (what you pay per pay period for coverage, regardless of if you ever use your policy), Yearly Deductible (typically this is the amount you pay out-of-pocket before your policy kicks in), and Out-of-Pocket Maximums (take special note on the amount of money you’ll shell out between your deductible and this amount). There may also be numbers related to In-Network Coverage and Out-of-Network coverage. Pro-Tip: Make sure your insurance plan offers in-network options in your area, or find another plan if at all possible.
So how do you pick a plan if you have options? With any luck, there will be a way to compare plans side by side. Weigh premium costs against the deductible and out-of-pocket maximums. Consider your health history, and decide if a lower premium and higher-deductible makes sense (can you pay that if you needed to?), or if a higher premium and lower-deductible is more prudent (can you handle the bigger deductions from every check, and will you for sure use your policy that much?). I’ve been choosing health plans for a lot of years, and honestly, sometimes it’s a crap shoot. I’m going to talk about high deductible plans because that seems to be where health insurance is currently headed.
High Deductible Plans: Remember when you were on your parents’ HMO and it cost $5 to go to the doctor’s office? Me too! Hell, two years ago our office visit co-pays were a mere $15. Turns out, it costs a lot more money to go the doctor. And when you have a high-deductible plan, you pay your insurer’s negotiated rate at 100% until you’ve reached your deductible for the year. For the record, my GP costs $160 per visit, my kid’s specialist is $300 for a level 1 visit. ANYWAY.
A high deductible plan is a plan that has a deductible higher than $1200 for an individual and $2400 for a family (these amounts were just raised). Once that deductible is reached, the next number that comes into play is Out-of-Pocket Maximum. This is amount that you will pay up to once your deductible is met.
Let’s say you meet your deductible, and then go see the specialist one more time. This visit costs $300, but your insurance coverage is 80/20. This means that the insurance will pay $240 and you will pay $60. That $60 you pay will go toward your out-of-pocket maximum.
I’ll be honest with you, for the year 2012 our coverage changed to this and I didn’t read the fine print. Our family deductible was $2400, and our out-of-pocket maximum was $8250. This means that basically, we will be paying our 20% of the bill for a long-ass time (thankfully, no one in our home is in poor health, but still).
So, how do you go about paying that extra $6000 in medical expenses you may be on the hook for if you break a bone, have to the ER for pretty much any reason or something more catastrophic happens?
This is where Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) come in. Up until enrolling in an HSA for 2013, we’ve always done an FSA.
A Flexible Spending Account is a spending account to use over the course of one year for medical expenses (there are also FSAs for dependent care). The money you contribute to your FSA is elected during open enrollment and takes effect when your plan year starts. It’s deducted from your paycheck, pre-tax. If you are lucky, the amount you pledge for the year is available for qualifying expenses on January 1 (some plans with smaller companies do not have this option, be sure to verify this when you enroll). This means that if you elect to contribute $2000 for the plan year, and you incur medical bills of $2000 on January 2, your FSA will reimburse you for those expenses in January, even though you haven’t actually made those payroll contributions. If you leave your job in February, you are not obligated to reimburse those funds. On the flip side, say you don’t go to the doctor all year long (or the eye doctor, or the dentist). Well then, you’re out of luck. Your FSA plan doesn’t refund that money.
Where the Affordable Health Care Act (AHCA/”Obamacare”) comes in: New for 2013, the limits on an FSA is $2500 (previous to this, there was no limit by law, most employers used a $5000 per employee limit).
Pro Tip: Because an FSA is a “use it or lose it” benefit, carefully decide on your contribution. Otherwise you end up buying extra contact lenses on December 31st. Ask me how I know.
Health Care Savings Account: HSAs are now all the rage, partially because not only is deducted pre-tax, its funds accrue from year to year. You can move it when you move jobs, you can even save it for health care in retirement. Even if your employer doesn’t offer an HSA, you can still open one yourself at a bank or credit union. Note you may only open an HSA if you are insured by an eligible high-deductible plan. Pro Tip: If you are independently opening an HSA, shop around for the best interest rates and lowest fees. Also note if you’re not doing this through a payroll deduction, you’ll be getting the tax benefit when you file your taxes.
AHCA implications: The HSA limits have been increased for 2013 to $3250 for an individual, $6450 for a family, with an additional $1000 if you’re over 55.
So how do you figure out what you should put into an HSA? If you’re pretty sure you’ll reach your deductible, start there. Funding your HSA with the money to cover your deductible is a wise move. If you don’t reach your deductible this year, any leftover funds stay in your account.
Say you have a $2400 deductible and get paid twice monthly. Each pay period, $120 would be deducted from your paycheck, before taxes, and deposited into your HSA. Here’s the catch: unlike most FSAs, in an HSA, only the funds that have actually been deposited will be available to use. If you incur a health care expense on January 1 and you haven’t actually made a contribution to your HSA yet, you can’t use your HSA account. Well, you can, but you’d have to go on a monthly payment plan with whomever you owe or reimburse yourself.
The AHCA has reduced the tax benefit of a FSA, and is focusing on Health Savings Accounts. For families that relied on FSAs with immediate funding, switching to an HSA can be a bit painful. The idea of being able to save for future health expenses is very appealing, so I’m getting over it. Of course, in this new scenario, we’re on the hook for a lot more of our medical expenses, but that seems to be the way of the world these days.
There’s been a lot of talk about the Preventive Care that will be covered under the AHCA. As of August 1, 2012, new health insurance plans must offer preventive care with no cost-share (no co-pay or deductible for the insured). Remember, this doesn’t mean that it’s free, it means that you’re paying for the service through your premiums.
Women’s health services falling under this provision include:
- Breast-feeding support, supplies, and counseling, including costs for renting or purchasing specified breast-feeding equipment from a network provider or national durable medical equipment supplier
- Domestic violence screening and counseling
- FDA-approved contraceptive methods, sterilization procedures and contraceptive counseling
- Gestational diabetes screening for all pregnant women*
- HIV counseling and screening for all sexually active women
- Human papillomavirus DNA testing for all women 30 years and older
- Sexually transmitted infection counseling for all sexually active women annually
- Well-woman visits including preconception counseling and routine, low-risk prenatal care
Here’s the catch: if you aren’t switching insurers for 2013, there’s no guarantee that these services will be included in your premiums. For exisiting policies, there’s a phase-in schedule, as well as the possiblity that your insurance policy is “grandfathered” in. I read information on many insurance companies’ websites for this article, and most listed their compliance with AHA in fairly plain language. Contact your insurance company to find out their exact phase-in plan for compliance. This can be especially important if you are using prescription contraceptives, and are planning your FSA or HSA contribution for the year.
So that’s the healthcare section Open Enrollment in less than 2000 words.
To recap what’s new for 2013:
- The deductible amount for a plan to be considered high deductible has been raised.
- The amount of what can be contributed to a health care FSA has been limited.
- The amount of what can be contributed to a HSA has been increased.
- Also new for 2013, health care expenses become tax-deductible once they exceed 10% of your Adjusted Gross Income, rather than the current standard which is 7.5%. Many preventive services may now be covered in your plan with no cost-share, but this will vary by insurer and by insurance policy.
http://patients.about.com/ This is a whole series of very informative articles on healthcare today.
Disclaimer: Please note, this information is meant for genreal knowledge and not meant to replace the information given to you by your employer or insurance company. Please contact your employer or benefit provider for full information regarding Open Enrollment and your benefits.