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How to Choose Your Health Insurance for 2021

COVID-19 has likely changed your employer's coverage options

By Kimberly Lankford

If you work for an employer that offers health insurance, you're likely in the thick of choosing your coverage for 2021. The COVID-19 pandemic adds some wrinkles to an already tricky decision. So, we've talked to some experts to help you select the best coverage at the right price.

Billing statement, health insurance, Next Avenue

Because of the pandemic, you may have new health care needs or want to ensure you'll have ample coverage in case anything happens to you or your family. Your employer may have changed coverage options due to the coronavirus, too. For instance, "virtual care has accelerated exponentially," according to the Business Group on Health report.

53% of large employers said their top initiative for the year is to implement more virtual care solutions in 2021.

There's a glimmer of good news: Many employers are trying to keep their health insurance costs and coverage relatively stable for 2021.

The average premium that employees paid in 2020, according to the Kaiser Family Foundation's 2020 Employer Health Benefits Survey: $1,243 for single coverage and $5,566 for family coverage. Health care costs for large employers are expected to rise by about 5% in 2021, similar to their increases in the past few years.

"Most employers are keeping the same coverage for 2021, unless they had a sizable increase in their premium renewal," says Wayne Sakamoto, an independent health insurance broker in Naples, Fla.

Telehealth and Employers in 2021

Wayne Sakamoto, health insurance, Next Avenue
Wayne Sakamoto

But you may have more telehealth options for 2021, with low co-payments. That's because the pandemic has led more Americans to see — or want to see — their physicians through video calls, or converse by phone or email, rather than in person.

In the Business Group on Health survey, 53% of large employers said their top initiative for the year is to implement more virtual care solutions in 2021.

And employers are expanding coverage for virtual services to all kinds of doctor's visits, especially telehealth visits with a therapist, psychologist or behavioral health specialists.

Many big insurers have said they may extend 2020's waivers for the cost of COVID-19 treatments into 2021.

If you have several health insurance plans to choose from, remember that premiums are just one factor in your decision.

You'll also want to compare the annual deductibles and other out-of-pocket costs for the health care and prescription drugs you usually use. The average deductible for large employers' most popular health plan is $1,500 for in-network care for employee coverage; $3,000 for family coverage, according to the Business Group on Health.

How to Compare Health Plan Options

Also, check to see the most you would have to pay if you have a major health issue in 2021. Maximum out-of-pocket spending limits for in-network care average $3,500 for employee coverage and $7,000 for family coverage (these figures don't include premiums).

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Ensure that the doctors and hospitals you might use are in the plan's network; these networks can change from year to year.

And scrutinize the fine print about telehealth coverage. Some plans will cover telehealth appointments with doctors in your network, others will require you to "see" physicians affiliated with telehealth networks they use. Co-payments and co-insurance rules for telehealth might differ, too, depending on whether your visits are in-network or not.

Also, see if your employer is offering incentives to sign up for any options, such as contributing to a Health Savings Account (HSA) if you choose a high-deductible plan. Employers contribute an average of $550 to employee-only HSAs and $1,018 for family coverage, according to the Kaiser Family Foundation. Nearly three-fourths of large companies offer high-deductible health plans.

Some employers add a surcharge for spouses who could get coverage through their employer but choose their spouse's plan.

Prescription drug coverage and cost is critically important, too. Find out which of your prescription drugs are covered and how much you'd pay, which can change from year to year.

Your co-payments may be different depending on whether your prescriptions are what's known as "preferred" or "non-preferred." That's true for generics and brand-name drugs.

You may have to pay a percentage of the cost of the medication, called co-insurance, which could make your out-of-pocket costs much higher for expensive brand name drugs.

If you are married and both you and your spouse have health insurance through your employers, take the time to compare all your health insurance options.

Advice for Married Couples With Health Plans

It may make most sense for you each to stay on your own employers' plans because employers tend to cover a larger portion of the cost of coverage for their employees than for family coverage. Also, some employers add a surcharge for spouses who could get coverage through their employer but choose their spouse's plan instead.

Keep in mind that one spouse's employer may have much better coverage options than the other, especially if they work for different-sized companies.

If you have kids under age 26 on your coverage, compare the cost of insuring them on each spouse's plan. Look at vision or dental coverage, too, because you can put the kids on one spouse's health insurance policy, but have dental and vision with the other spouse's employer if that's a better deal.

Make the Most of an HSA

Choosing a high-deductible health insurance policy usually gives you the opportunity to save for the future and save on taxes in a Health Savings Account. To qualify for 2021, you must have an HSA-eligible policy with a deductible of at least $1,400 for individual coverage or $2,800 for family coverage.

HSAs provide a triple tax break: Contributions made through payroll deduction are pre-tax; the money grows tax-deferred and it can be used tax-free for eligible medical expenses at any time. You can use HSA money to pay your deductibles, co-payments, prescription drug costs and other out-of-pocket medical expenses now and in the future.

Not only is there no deadline for spending the money, you'll get a bigger tax benefit if you keep it growing in the account for future expenses. After you turn 65, you can also withdraw HSA funds tax-free to pay premiums for Medicare Part B, Part D and Medicare Advantage plans, in addition to other medical expenses.

You can contribute up to $3,600 to an HSA in 2021 if you have individual health coverage or up to $7,200 for family coverage, plus an extra $1,000 in catch-up contributions starting in the year you turn 55.

"Catch-up contributions are a great way to save more for retirement while reducing taxable income while working," says Kim Tippens, senior director of benefits accounts for Willis Towers Watson, a benefits consulting firm.

If both spouses are 55 or older, you can each contribute an extra $1,000 to an HSA. That would bring the maximum total contributions to $9,200 for the year if you have family coverage. But both spouses can't make catch-up contributions to the same HSA.

"Couples with both spouses over fifty-five can maximize the catch-up contribution by opening and contributing to their own individual HSAs," says Tippens.

Kimberly Lankford
Kimberly Lankford has been a financial journalist for more than 20 years and is the author of three books. As the “Ask Kim” columnist at Kiplinger’s Personal Finance Magazine, she received hundreds of reader questions every month about insurance, taxes, retirement planning and other personal finance issues. Her financial articles have also appeared in The Washington Post, U.S. News & World Report, AARP Magazine and Military Officer Magazine, and her syndicated columns were published in The Chicago Tribune and other papers. She received the personal finance Best in Business Award from the Society of American Business Editors and Writers. Read More
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