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6 Ways to Make Smart Open Enrollment Choices

How to pick a health plan and get a hand from Uncle Sam

By Jack Fehr

Every year, companies across the country engage their employees in an exercise called open enrollment. Some employees just throw up their hands in confusion. Don’t be one of them.

Here’s proof of how complicated many workers find health insurance open enrollment: A recent survey by ConnectedHealth, a private insurance exchange company, found that more than half the employees polled felt choosing a health plan was more complicated than solving Rubik’s Cube.

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Often, frustrated employees just stick with last year’s benefit selection. That could be to their detriment because the coverage and terms of the plans they’re offered may have changed greatly since then.

Selecting based purely on the size of the premiums is a mistake, too. “It’s easy for employees to look primarily at premium costs, but they also need to look at other charges,” says Julie Stich, ‎director of research at the International Foundation of Employee Benefit Plans. “You can have deductibles, and co-payments for prescription drugs, labs and doctor’s visits. Plans also have in-network vs. out-of-network charges that differ. And double-check to make sure your current health care provider remains in your plan, because these lists change.”

So if you haven’t made your open enrollment selections yet, take a few extra minutes to really study the health benefits your employer offers and what your true outlays might be. Here are six ways to do it:

1. Look at your total costs. If you only look at premiums, you’re missing the big picture, since you’ll likely also be on the hook for deductibles, co-insurance and co-payments. Deductibles have risen 67 since 2010 — much more than premiums and wages, according to the Kaiser Family Foundation/Health Research & Educational Trust 2015 Employer Health Benefits Survey.

2. Use your plan’s preventive care. For most health care services, you must pay your plan’s deductible out-of-pocket until you meet the deductible limit. However, the Affordable Care Act (aka Obamacare) mandates that health plans must generally offer preventive care at no cost to you whether you’ve met their deductible or not.

Preventive services include everything from immunizations to depression screening. Use them. They won’t cost you.

3. Take advantage of Uncle Sam’s gift to you, Part I. There are two ways the government can help subsidize the cost of participating in some employer-sponsored health savings plans. One is if you sign up for a Flexible Spending Account (FSA), which will let you deduct up to $2,550 from your paycheck, pretax, in 2016 to pay for medical, dental and vision expenses not covered by your plan.

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If you’re considering an FSA, figure your anticipated health expenses carefully. Depending on your plan, you could lose your FSA savings if you don’t use the money in a given year. Talk to your Human Resources department to learn more.

4. Take advantage of Uncle Sam’s gift to you, Part II. The other way the government can help shoulder health costs is if you choose a high deductible health plan — that’s a plan with an annual deductible of at least $1,300 for individual coverage for $2,600 for family coverage. Then, you may be allowed to sign up for a Health Savings Account (HSA) and funnel pretax from your paycheck as much as $6,550 for individual coverage or $13,100 for family coverage to use for the plan’s deductibles, copayments and coinsurance.

Unlike an FSA, there’s no use-it-or-lose-it rule. Any money you put into an HSA in 2016 but don’t use can get rolled over for future expenses.

“You get $150 in tax savings for putting $500 into an HSA if you’re in the 30 percent tax bracket,” says financial journalist Nicole Lapin,  the author of Rich Bitch.  “An HSA is yours for life, a triple tax-winner that allows pre-tax contributions, grows tax-free and allows tax-free distributions (for eligible health expenses).”

5. Take a good look at your “voluntary benefits.” By that I mean ones beyond health and retirement plans — disability income insurance, long-term care insurance and indemnity insurance. These types of group benefits are becoming more popular. You typically pay the full cost, but that’s often less than what you’d pay buying the coverage on your own.

6. Medicare-eligible employees need to pay extra attention. If you’re 65 or older, you qualify for Medicare and you should sign up for that even if you’ll have an employer’s group health coverage in 2016. Typically, the government slaps a penalty on eligible Medicare beneficiaries who don’t apply.

If your employer has at least 20 employees, you can buy group health through work and use that as your primary insurance. But if your company has fewer than 20 employees, Medicare becomes your primary coverage. The Medicare website’s online brochure, Medicare & Other Health Benefits: Your Guide to Who Pays First, has more information on this.

Jack Fehr is a financial writer, blogger and content creator whose specialty is making sense of financial-speak. Read More
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