What You Need to Know About Open Enrollment: Health Insurance Options

by Ryan Guina

Open enrollment season means that it is time for you to start thinking about your options. Because we are talking about health care, you are likely to see an increase in premiums for your health plan. Additionally, you are likely to see increases for co-pays and also for what you pay for name brand drugs. These likely changes to your health plan make it imperative that you carefully consider your health plan options before signing up for the same old plan again this year. You might even consider comparing individual and group health plans to see if you can find a better option for your needs.

Open Enrollment Health Insurance Options

Open Enrollment OptionsThere are several types of medical insurance, and we will cover the most common types – keep in mind that your company may offer variations, combinations, or something completely different than these listed here. This is general information only, and you should examine your policy options closely before making a decision on which health plan option to choose.

Allow yourself plenty of time to read plan materials provided by your employer so that you understand your options. Compare coverage and costs, and evaluate your own needs.

One of the best things you can do is look at what your family needs in terms of health care, and choose a plan that best fits that. As time progresses, changes in your family situation may mean changes to your coverage. New rules that allow adult children on your insurance may affect your needs, as can a new baby in the family. Another good idea is to consider the coverage you are receiving. A woman who has had a hysterectomy no longer needs maternity coverage.

It is also a good idea to understand your Flexible Savings Account. Many employers are moving more toward helping you with a FSA, since it costs them less. Find out the rules associated with the FSA, and when you have to use the money in your account before you lose it. It is vital that you understand your FSA options in order to avoid costly misunderstandings.

Now, let’s go over those options!

Fee For Service Health Care Plans

Fee for Service health care plans are the most flexible healthcare insurance plans available, as you can visit any doctor at any time, without a referral required by the insurance company. You do not need to worry about in or out of network providers and you can visit any hospital in the country. You also pay for this flexibility.

You are required to pay a health insurance deductible out of pocket before the insurance company will begin paying for any of your medical bills. Once you reach your deductible you pay coinsurance, which is when you share the health care costs with your insurance company, usually by a set percentage of the total bill. Some fee for service plans place a cap on the amount of out of pocket expenses you can incur within the course of a year. For example, in addition to your monthly premiums you may have a $500 deductible, and a $5,000 annual cap on your insurance. Be sure to read the plan thoroughly because there are often restrictions regarding which types of medical care are covered in this type of health insurance plan.

Pros and cons of fee for service health care plans:

  • Pros: Freedom to choose health care provider, Cap on annual expenses.
  • Cons: Restrictions on some plans, cost may be more than an HMO or PPO.

Health Maintenance Organization – HMO

With HMOs, health insurance companies negotiate fixed rates for health care with a select group of medical care specialists. Health care is limited to in-network health care providers who are a part of your HMO plan. To receive care, you are required to select a Primary Care Physician (PCP), usually a general care practitioner, who is your central point of contact for all medical care, including appointments, specialist referrals, and other medical care. You will need to visit your PCP for all medical inquiries or to get a referral to a specialist. You run the risk of paying out of pocket for using an out of network medical professional unless it is an emergency or your plan specifically gives permission. While there are limitations to HMO plans, they are often a low cost health insurance option because of the low rates the health insurance companies are able to negotiate.

Pros and cons of HMOs:

  • Pros: Lower premiums and deductibles, and higher coverage rates.
  • Cons: Required to select a PCP, must get specialist referrals, and are restricted to in-network health care providers.

Preferred Provider Prganization – PPO

Preferred Provider Organizations are generally a little more expensive than HMOs, but they offer more flexibility. PPOs have negotiated rates with their networks, but you are free to go out side the network for healthcare coverage, though you may have to pay more for it. Primary Care Physicians are not required and you can visit a specialist without a referral.

Pros and cons of PPOs:

  • Pros: PCP is not required, referrals are not required for specialists, and out of network providers are covered.
  • Cons: Premiums and deductibles are often higher than HMOs, percentage of coverage may vary.

Health Savings Accounts and High Deductible Health Insurance Plans

Health Savings Accounts (HSA) are gaining in popularity among both employers and employees – employers because they save money on group health insurance costs, and employees because they have more choice on how they use their medical coverage and they can save the money they don’t use in any given year and roll it over to the next year. HSAs are a tax-favored savings account that is combined with a high-deductible health insurance plan.

Contributions to your Health Savings Account are considered an “above the line” tax deduction and are considered a federal income tax deduction, regardless of whether or not you itemize your deductions. Some states also allow tax deductions for HSA contributions.

Pros and cons of HSAs and High-deductible plans:

  • Pros: Low monthly payment, money grows in a tax-deferred savings account until withdrawn for health care needs. This may be a good plan for healthy individuals with few medical care needs.
  • Cons: High deductibles and co-pays. limited coverage in some cases.

Other Health Savings Plans. There are several health savings plans available, including HSAs, Health Reimbursement Accounts (HRAs), and Flexible Spending Accounts (FSAs). You can read more to determine which Health Savings Plan is the best for your needs.

Individual Health Insurance May be Cheaper!

One of the things that surprised me is that it was cheaper for me to get health insurance coverage through an individual health insurance policy rather than a group health insurance policy. When comparing individual and group health insurance, you need to look at several factors including amount of coverage, insurance policy rates, and other factors. We ended up saving several thousand dollars per year with an individual health insurance plan that we purchased through eHealthInsurance.com.

Terminology is Important!

When comparing health insurance plans, it’s important to understand what you are getting. For example, “in-network” and “preferred providers” are often interchangeable. Co-pays are when you make a payment at the time of service, often a set rate that is clearly negotiated as part of you plan. Co-insurance is when you pay a percentage of the bill, usually in the 10-30% range. There is a HUGE difference in the meanings of co-pay and co-insurance when you are dealing with a major medical procedure!

What if I Can’t Afford or Get Approved for Health Insurance?

As many know, there were quite a few changes that took place within the last eight years due to the health care reform bill, the Affordable Care Act, instituted by President Obama. While some of the changes may have affected you and your loved ones, it’s important to understand at least the basics of this bill.

The goal of the health care reform bill was to require everyone in the US to have health insurance by 2014 (or face an annual fine of $695). This would be accomplished by several methods. It required some businesses to provide health insurance to their employees or face large fines per employee, and other individuals would be required to pay for their own insurance.

Starting in 2014, insurers were not able to reject applicants based on their health status or pre-existing conditions. Also starting in 2014 there were separate health insurance exchanges for small businesses to purchase insurance for their employees. While many changes have taken place of the past several years, there are yet still more changes to come.

Summary of Health Care Changes in 2018:

  • Excise taxes will be levied on employers who provide plans that cost more than $27,500 for families and $10,200 for individuals.

There are many more changes that will take affect between now and 2018, but these are the major issues. If you’re concerned about the changes, talk to your employer about how the health care reform bill will affect your health coverage.

Bottom Line

Health plans are in a state of flux right now, offering a number of new incentives and possibilities. The cost of health care is likely to continue to rise, but if you are careful about your decisions during open enrollment, you can reduce some of the impact health costs have on your pocket book.

Be sure to read your health coverage plan thoroughly, and call your Human Resources department or insurance company if you have any questions or if there is anything you are unsure of. Remember, cheap health insurance isn’t always the best health insurance. But with some research, you should be able to find affordable health insurance that meets your needs.

 


Published or updated October 19, 2016.
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{ 5 comments… read them below or add one }

1 Miranda

Great guide. We just found out that we are going to be socked with an age-based premium increase of $80 ($40 as my husband and I each turn 30). So we’re looking at the HSA with high deductible. If we can get the premium low enough on the health plan, it would be totally worth it to pay out of pocket for doctor’s visits (especially since some of them offer a discount if you don’t use the insurance company).

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2 Financial Samurai

Ryan, this is a great update. It’s all about estimating how sick you will be next yr! After spraining my wrist, and playing 10 hours of tennis every week for 8 months, as well as getting into a big basketball fight, I need to check myself out, and am willing to pay a high premium!

FS

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3 Manshu

If I change from one type to another, is there anything extra I’ll have to pay, like a switching fee or something?

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4 Ryan

Check with your plan, but there is usually no fee if you change your benefits elections during the annual open enrollment period. However, the cost of your coverage may change, so be sure to read the details of the new plan you select.

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5 J.R. Seaman

I am a health and life insurance agent but mostly deal with health insurance for groups and individuals. You need to make sure of a couple of things before you switch.

1. Make sure you don’t cancel coverage with one company before you switch to another.

2. If you have bad health conditions you may not get covered by another company. If you are sick it is smart to stay who you are with.

3. Look at all of the options, out of pocket maximum/stop-loss, copay, deductible, Rx benefits, and of course your monthly premium.

4. Make you effective date with the new company on the first of the month. Once you are accepted by the new insurer, cancel your old plan on the last day of the previous month. This will give you a clean transition and help you not have to deal with billing complications.

By the way, I have never seen any kind of fee for canceling a policy. I am located in Texas and the laws may be different in your state. So, it is better to be safe and check. But there shouldn’t be any charges.

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