You get an opportunity each year to sign up for health insurance. Here's how to make the most of it.
Most Americans can change their health insurance once a year. "Open enrollment is the opportunity to examine or reexamine the choices made a year ago," says Joe Ellis, senior vice president of CBIZ Inc., a financial services provider. Workers, self-employed individuals and Medicare recipients all typically have access to an open enrollment period offered through their employer or the government. Eligibility for open enrollment and when you can sign up depends on how you get your insurance coverage.
To make the most of open enrollment, evaluate your previous health care spending and estimate your future needs. Then consider opening a health savings account to supplement your policy if allowed. Keep reading for a primer on open enrollment.
When Is Open Enrollment?
Open enrollment is a window of time in which people can change their health care coverage. "It's a great opportunity to look at what's being offered next year (and) to look at whether you've taken advantage of all the benefits available to you," says Deana Calvelli, a retirement consultant with the professional services firm Lockton Companies.
There are three main types of open enrollment:
|-||Employer-based health insurance: Most employers offer an open enrollment period in the fall when workers can not only change their health insurance coverage, but also select other benefits such as voluntary critical illness, disability or life insurance plans.|
|-||Health insurance marketplace coverage: Most self-employed workers and those who don't have health coverage through an employer can buy a policy on the government Health Insurance Marketplace. The marketplace, also known as the federal health insurance exchange, was created with the passage of the Affordable Care Act as a way to ensure people had access to individual health plans. Some states have their own exchanges as well. Open enrollment for the federal marketplace runs from Nov. 1 to Dec. 15.|
|-||Medicare: Changes to Medicare health and drug coverage can be made from Oct. 15 to Dec. 7. Those with Medicare Advantage plans have an additional open enrollment period from Jan. 1 to March 31. Medigap policies, also known as Medicare supplement insurance, have an open enrollment period that lasts for six months when someone first becomes eligible for Medicare.|
Aside from these time frames, you may be eligible for special enrollment periods if you experience certain life events such as losing a job, moving to a new area or losing coverage from a parent. Other forms of health insurance have rolling application periods and allow people to sign up for coverage at any time, including Medicaid, the Children's Health Insurance Program and short-term health insurance.
How to Evaluate Health Insurance Options
When looking at your health insurance options, don't buy a plan based on price alone. "Going with the lowest premium is not always the best thing," Calvelli says. Cheaper plans may have more restrictions and higher deductibles.
"Pay particular attention to the carrier and the carrier network," Ellis says. In an effort to cut costs, some plans may use a narrow network, meaning they will only fully cover services provided by a relatively small number of doctors and facilities. Going outside the network could result in significantly higher bills or rejected claims.
Still, a cheaper plan with a higher deductible might be the best option for someone who is healthy and not taking any medications for chronic conditions. People should pay particular attention to what their medical expenses were in the previous year as well as what might change in the upcoming year, Ellis says.
Combining Health Insurance With a Health Savings Account
Large employers expect to spend approximately $15,000 per employee for health benefits in 2020, according to the 2020 Large Employers' Health Care Strategy and Plan Design Survey conducted by the nonprofit National Business Group on Health. To combat rising costs, employers are exploring strategies such as using virtual care options that allow for consultations through a website or app as well as emphasizing cost-conscious models of coverage.
"We have seen a lot more employers offering consumer-driven health care plans," Calvelli says. These plans have higher deductibles and can mean higher out-of-pocket costs. However, they also may come with the opportunity to open a health savings account.
In 2019, workers younger than age 55 can deposit $3,500 into a health savings account if they have an individual health insurance plan or deposit $7,000 if they have a family plan.* Workers age 55 and older are entitled to make an additional $1,000 catch-up contribution. Money deposited into a health savings account is tax-deductible. It grows tax-free and can be withdrawn tax-free to pay for qualified health care expenses.
"You have to think of it as a 401(k)," says Steven Auerbach, CEO of Alegeus, a consumer-directed health care solution provider. Unlike flexible spending accounts, another health care savings option offered by some employers, money in a health savings account never expires. Workers can make the maximum contribution to the account each year and let the money grow for use in the future.
Only health plans that meet certain minimum deductible and maximum out-of-pocket costs can be combined with a health savings account. For 2019, the minimum deductible for an eligible single health care policy is $1,350, while the maximum deductible and out-of-pocket cost is limited to $6,750; for family plans, the minimum is $2,700 and the maximum is $13,500.
Most workplace and government health insurance exchange plans that meet these requirements are clearly marked as HSA-eligible, Auerbach says. What's more, employers may set up payroll deductions for health savings accounts for employees and even make contributions of their own to these accounts. You can set up your own health savings account with a variety of banks, credit unions and even investment firms like Fidelity.
More Tips and Tools for Open Enrollment
Navigating open enrollment can be difficult for many people. They may not understand health insurance jargon or know how to estimate expenses. Fortunately, help is available.
"Employers have some great tools available to model costs," Ellis says. Companies may have online portals or apps that ask questions such as a person's age, marital status, number of dependents and health conditions. Then, the system makes recommendations for various levels of coverage based on that information.
Meanwhile, the Health Insurance Marketplace allows users to input prescription and provider information and then highlights which plans provide coverage for these drugs and doctors. It will also provide an estimated annual out-of-pocket cost.
Unfortunately, these tools are not readily available to Medicare beneficiaries, Ellis says. Instead, older Americans may have to consult with a trusted advisor or agent to help them understand their insurance choices.