Most Americans set it and forget it and just roll employee benefits each year. However, when both spouses are working, there may be an opportunity to maximize benefits and potentially save by comparing the plans from each spouse’s employer. Not to mention, many employers may offer multiple plan options to select from. There are a few key reasons to reevaluate your employee health benefit options instead of just “rolling” them each year.
How much of your premium does your employer subsidize? Most employers typically cover a portion of the premium, but just how much they cover varies from employer to employer. Looking at the available options through your own employer, you might find that another plan has a lower premium. You could also consider joining your spouse’s health insurance if a joint premium ends up being more cost-effective. Gather all the information for each plan available and determine the best option for your needs.
The deductible is the amount that you need to pay before the insurance company covers expenses. The premium is generally influenced by the amount of your deductible. The higher your deductible, typically the lower the premium. If you think you may have necessary medical procedures in the coming year, or if you have a high need for medical care, you’ll want to pay attention to the deductible. It may be more cost effective to switch plans to a slightly higher premium with a lower deductible if you know your medical needs will be increasing over the next year.
Lower Coinsurance and Maximum Out of Pocket
You’ll want to look at the opportunity to lower your coinsurance and maximum out of pocket for the same reasons as decreasing your deductible. Coinsurance is the percentage that you pay after the deductible is met and varies from plan to plan. For example, with a 20/80 coinsurance split, you pay 20% and the insurance company covers the other 80%. Maximum out of pocket (or MOOP) is the maximum amount that you will pay in a calendar year, including your deductible and co-pays (but excluding your premium payments). If you have a large amount of medical expenses, coinsurance and MOOP can quickly add up, so considering your employer’s other plans or joining your spouse’s insurance could end up saving you money in the long run.
Change Plan Type
The type of plan you have, either an HMO or PPO defines the structure that you have to work within. It could be worth your time to consider which plan type will best match your needs. Under an HMO (health maintenance organization), a referral is needed from a primary care physician in order to see specialists in the HMO or to have any diagnostic services covered by the insurance company. Note that specialist treatment, tests or x-rays outside of the HMO would not be covered. Under a PPO (preferred provider organization), however, you are not required to get a referral to see specialists and there is often a wider range of choices. In addition, out-of-network providers may be partially covered.
Your Doctors are Out of Network
Don’t forget to check if your doctors are in network—if not, it may be time to reevaluate your insurance plan options. The insurance carrier’s website should have a listing of the medical professionals in your area that are in the network. Physicians not in your network will cost more and some physicians won’t even accept certain insurance carriers. Even if your primary physician is in network, it could be helpful to see which specialists (if any) in your area are in network should you end up needing advanced care, particularly if you have any planned procedures coming up this year.
It’s important to check any exclusions that may apply to your plan and adjust accordingly. For example, some plans do not cover preventative care such as annual physicals, so you’ll end up incurring those expenses completely out of pocket. In that case, you might want to consider switching plans during your open enrollment period.
Take Advantage of an HSA
Health savings accounts (HSAs) are typically offered in conjunction with a high deductible plan and can help offset medical costs starting now and continuing through retirement. If you have access to an HSA through your employer, they can be particularly advantageous because annual contributions are excluded from your gross income. For 2020, the annual contribution limit will be $3,550 for individuals and $7,100 for families (with an additional $1,000 catch-up for those over 55). Earnings in an HSA grow tax-free and, when funds are withdrawn for qualified medical expenses, the distributions are also tax-free. Unlike a flexible spending account, any money in an HSA rolls over from year to year without penalty.
As tempting as it can be to roll over your health benefits from year to year, reevaluating your options during open enrollment could end up saving you money in the long run. If you need assistance evaluating you options, Wealth Enhancement Group advisors can help assess you and your spouse’s employee benefits as part of a comprehensive financial plan.
This blog was co-authored by Noel Santiago, Director, Group Benefits.
The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual.
Chris has more than 30 years of experience in the financial services industry in the areas of accounting and financial planning. He is well-versed in the financial challenges faced by most individuals.