3 Considerations for Open Enrollment

Merry Open Enrollment! Ok – perhaps it doesn’t have quite the ring of the other Season greetings thrown around this time of year. Still, there are quite a few similarities between open enrollment and the upcoming holiday season:

  1. There are looming deadlines in November and December
  2. It can be overwhelming
  3. Many people just go through the motions, or ignore it altogether
  4. Lack of planning can lead to unwise purchases

But open enrollment is nothing to dread – and certainly shouldn’t be ignored. Perhaps you’ve just received a heavy snail mail package from your HR department, or are wading through the many choices available through ACA. It’s understandable why reviewing these options can feel like a heavy lift. But this isn’t the time to close your eyes and point. The easy routes – just repeating what you did last year, or simply picking the cheapest plan – may be the worst financial decision you could make this season. Here are 3 things that will help you ensure your medical insurance plan matches your needs and your pocketbook.

1. Do the math

One of the biggest mistakes people make during open enrollment is ignoring the math. Looking at the number you’re shelling out annually quickly puts “monthly” purchases into perspective. A simple concept, but one too many skip: comparing the cost of your plan on an annual basis with the actual cost of the services you know you’ll need.

Here’s an example. The year I pregnant became with our first child, my husband and I had a PPO and paid $600 a month. To add a child, the cost would jump to $1,300 – or, a whopping $15,600. And the cost would have been the same whether we added one child or ten!

Comparing that $15,600 annual number to the cost of a hospital delivery was a no-brainer. We knew that was not the year to go light on coverage.

But the following year, we did the math again and realized our PPO offered far more coverage than we actually needed. At first, we were apprehensive about letting it go. But in reality, we had to look at the benefits and think – do we need to buy all of this? Does this plan even fit our new lifestyle?

Fear is a big reason many folks stick with the status quo. But when it comes to insurance, it’s important to weigh your options.

2. Be your own advocate and shop around

Here’s a secret – you’re allowed to ask questions. Medical providers bill insurance companies – but most often, this figure isn’t what they are actually paid. And most people don’t think they “can” ask. Imagine blindly accepting a bill for any other service!

For example, my doctor performed pretty routine blood work that I’d assumed was covered by our plan. It wasn’t. At the time, I didn’t think to ask the doctor which lab he used, or what I’d be charged. So it was on me when I received a surprise bill for $926.

The alternative? I could have asked for the labs I needed and shopped around.

Shopped around … for lab work?

Yes! When it comes to medical services, pricing may feel mysterious and shrouded in secrecy – but it shouldn’t be. Before selecting insurance, research the cash rate for those services you might expect to use. Then, compare those numbers to the annual insurance premiums + copays. You may be surprised.

How? Great question. There are websites out there like Discountedlabs.com, Turquoise.Health, and GoodRX.com where you can compare pricing for medical services. Had I done so, I would have learned the exact same lab work could have been performed for $119. And this price shopping becomes far more important for big-ticket services that could significantly impact your wallet.

Another consideration is a common occurrence: When a doctor orders labs or services that are rejected by the insurance company. It raises the question, how much influence does insurance have on the medical profession and therefore, our individual medical needs?

Let’s be clear – I’m not advising anyone to forgo health insurance altogether. Insurance is for the unknown, and catastrophes unfortunately do happen. (Emergencies are not the optimal time to be choosy, either). But for routine, or less-immediate services, like mammograms, colonoscopies, or MRI’s, for example, get clarity on how much things actually cost – in advance.

3. Consider a High-Deductible Health Insurance Plan

Surprisingly, high-deductible plans aren’t so scary. Like most plans, they cover the costs for routine exams – but the rest of your coverage won’t kick in until a certain deductible is met. This can be a nerve-racking concept for those anticipating even modest medical expenses. But if you do the math and shop around, you might find your out-of-pocket costs are less than what you’d fork over with traditional HMO or PPO premiums.

When you have a high-deductible plan, you can also use a tax-free Health Savings Account to cover medical expenses up to the contribution limit ($3,650 for individuals, and $7,300 for families).

Pro tip: You’ll receive a tax deduction by contributing to an HSA whether you use it that year or not – so consider paying out of pocket for nominal expenses, and letting the HSA accumulate tax-free. The money in your HSA would simply roll over each year – and those funds can be invested.

Theoretically, let’s say you have 20 years left until retirement, and you contribute to your HSA each year – but don’t wind up using it. If those funds are invested, at a 6% annual return, you’d have over $145,000 at retirement – which is usually a point in life when medical expenses can be expected to rise significantly. With the proper receipts, you could even draw that money down tax free.

And that’s the best gift of all.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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