HOW TO ROCK OPEN ENROLLMENT THIS FALL
In today’s post, we are going to talk about how to rock your company’s open enrollment this year. You didn’t know benefits enrollment was rock-worthy did you?
Open Enrollment. Annual Enrollment. Open Season. Whatever your company calls it, you get one time a year to evaluate whether you want to make changes for the upcoming year. Don’t blow it! For simplicity sake, we are going to assume your company operates on a Jan 1 to Dec 31 plan year. If that doesn’t apply to you I greatly sympathize with you because it makes tax planning a huge beast!
So, if you are like many of the employees I work with, open enrollment planning involves about a whole ten minutes of your time or maybe even you delegate the task to your spouse and never think about it again. That’s probably not netting you the best results for you and your family. Every company is different. The plans they offer and the prices they charge for them will be different as well.
No one takes you by the hand and tells you what is the best choice for you. With high-deductible plans, marketplace coverage, carved out providers, accountable care organizations, etc., the benefits and insurance scene is overwhelming and it’s been changing rapidly over the last few years. Don’t go on auto-pilot and just pick the same darn-thing you’ve had for the last five years. You may be over-insuring yourself and paying for more than you need. You may also be missing out on valuable tax reductions.
WHAT NOT TO DO
To reach rock-star status, you have to separate yourself from the karaoke crowd. By all means, avoid these enrollment pitfalls:
- Failing to consider the actual claims you and your family have had over the last 12 – 24 months. Typical data and average data are just that. Your family is unique so take a few minutes to log into your current provider’s website to review your actual claims and out of pocket costs for recent history – take notes!
- Failing to check that your preferred provider or providers have been and continue to be ‘in-network’
- Failing to consider the tax savings of pre-tax deductions from your pay, vs. what you may have to pay for with after-tax dollars
- Failing to take advantage of a Flexible Spending Account or Health Saving Account (depending on the type of health plan offered to you) to reduce your taxes. You have to elect these every year – don’t miss out!
- Failing to compare prices and options with your spouse’s plan (if they work)
- Failing to take off your adult children when they get jobs with insurance of their own (ACA rules make it mandatory to permit adult children until age 26 regardless of their residential, marital, employment or school status. However – it doesn’t mean you have to keep them on your plan)!
- Failing to attend an enrollment meeting or webinar to refresh your understanding and preview changes for the upcoming year
- Failing to make changes by the deadline. Your company absolutely does not care that you missed the enrollment deadline because you were on your annual fishing trip with your Uncle Joe. They sent you like 20 email reminders over several weeks. Man-up and plan ahead!
Listen, you forfeit your right to complain about the choices you made if you fail to take some time to understand what’s offered and make an informed decision.
WHAT WE RECOMMEND
Step 1: Review your claims history. Either pull out your over-stuffed file with printed EOBs (Explanation of Benefits) or login to your current provider and review. Take notes about copays, deductibles, and how often each family member went to the doctor. This is the most relevant data available to you. Not average U.S. family statistics, etc.
Step 2: Be sure the providers you used recently were ‘in-network’. You’ll know if they weren’t because on your EOB the expenses you have to pay will be higher and they will count towards your out-of-network deductible. You’ll want to review networks for medical, dental and vision if offered these plans.
Step 3: Calculate the payroll deductions for each option available to you on an annualized basis. This is really important. You have to budget for the whole year at once and consider the tax impacts of your choices. If you are hyper focused on the per-paycheck deduction only and simply go for the cheapest plan you see, you are going to be gob-smacked when the first out of pocket expense hits you! The deduction is what is taken out of your paycheck for each benefit you enroll in. Depending on your company, many present the costs both in your regular pay frequency and also annually to make it easy for you. If they don’t (boo on them) you want to do this:
Paid monthly? – Multiply by 12
Paid twice a monthly? – Multiply by 24
Paid weekly? – Multiply by 52
Paid Bi-weekly? – Multiply by 26
Step 4: Study the summary charts provided in your enrollment materials. The first thing you want to dig into is the medical plan summary chart. Are there any changes from this year that you need to know about. Is the deductible or copay going up in your current plan? Do you know the difference between the deductible, Out-of-Pocket maximum, copay and coinsurance for example? If not – here is a link to a cheat sheet.
Step 5: Estimate the expenses for each family member in contrast to the deductible and copay. Almost every carrier has an online comparison tool to help you. Take advantage of it. Sometimes your employer will have a tool of their own on the benefits enrollment website. There is so much help available, we won’t spend the calories here to re-create the awesome tools out there. It shouldn’t take more than fifteen minutes to run through online calculators available to you.
Step 6: Add your anticipated out-of-pocket expenses for the whole family to the total annual contributions for each plan you are comparing. Are they close? Is one way higher than the other?
Step 7: Consider whether you will have enough out-of-pocket costs to take advantage of the Flexible Spending Account (FSA) if one is available at your job. An FSA will help reduce your income taxes. An FSA can be used for health care expenses for you and any of your qualified dependents (even if they aren’t on your health plan). The beauty is the funds are deducted pre-tax but you must use them for healthcare expenses. The bad news is you can’t rollover the unused funds (some companies now permit up to $500 to rollover but not all employers do this – it’s optional) so you risk losing anything you don’t spend. Also, many companies give you a grace period up to 2.5 months after the year ends so check if your company does this.
The IRS current limits up to $2,550 for FSA contributions. Even if everyone in your family is fairly healthy, we all end up with some out-of-pocket costs from time to time. You can only save on your taxes for these expenses by using a pre-tax spending account to pay for them. If you don’t use a pre-tax spending account, those expenses are paid for with your after-tax dollars.
If you have a high-deductible plan which qualifies for a Health Savings Account, consider whether you can fund the full annual limit to stash away additional pre-tax funds without the threat of the use-it-or-lose-it rule which applies to the FSA option.
Your company may offer HSA seed money or a matching contribution, factor that in as well. The 2017 contribution limits for employee and employer combined are $3,400 for single folks and $6,750 for families (two or more individuals).
For more about Health Savings Accounts, read here for an awesome explanation by Mad Fientist about using these accounts as a supplemental retirement account. Also, see our earlier post about our experience using HSAs over the last 8 years here.
Beware: You are ineligible to contribute to an HSA if you are enrolled in Medicare, are covered by any other first-dollar health plan (including an FSA/HRA through your spouse or TRICARE), or you can be claimed as a dependent on someone else’s taxes (not your spouse).
If you are having trouble with Steps 5 – 7, consider UnitedHealthcare’s online comparison tool. Go to www.myuhc.com and click on “Estimate Health Plan Costs” on the right side under Links and Tools. You don’t need to be a registered UHC member to use this tool! How generous of them, huh? You’ll need your medical plan chart in front of you to enter the specifics of the 2 or more plans you are comparing. Look for the “Add Your Own Plan Estimate” to input the exact details of your company’s offerings to compare. This tool allows you to consider your tax filing status, your taxable income range and uses the FSA and the HSA pre-tax spending options in conjunction with your health plan choices. Score!
Step 8: While you are in your company’s enrollment system, take a moment to review and update your life insurance beneficiary designations. If you’ve had major changes like a divorce or added new kiddos to the brood, it pays to update them and many of us forget to do it. It could lead to terrible financial consequences for people you really care about. Seriously. It takes a minute to review them.
Now you are ready to be an enrollment rock-star! You’ve set aside time for reading and research. You are preparing questions for your HR department if anything seems fishy or unclear to you. You are going to attend the employee review meeting (bonus: they’ll probably pay you for attending, maybe provide lunch or snacks and it gives you a break from your day job!) You absolutely will not be one of the wonks who misses the enrollment deadline.
For extra credit, be the one person that walks in the very first morning of enrollment season with your questions prepared. Your HR person may just hug you! Tell them Mrs. Need2Save sent you.
Tell us about your enrollment experience. Is your company making major changes for next year? Are you going to sign up for the FSA or HSA for the first time?