Preparing for open enrollment
As you start to review your options, you'll probably hear some industry jargon. Here are a few key terms you should know:
- Premium: The amount you pay for health insurance each month.
- Deductible: The amount you pay out of pocket for covered health care services before your insurance plan starts to pay.
- Copay: A fixed amount ($20, for example) that you must pay for a covered health care service.
- Coinsurance: A percentage of the cost associated with a covered health care service that you must pay (20%, for example) after you've paid your deductible.
- Out-of-pocket max: The most you'll have to pay out of pocket for covered services in a plan year.
- High Deductible Health Plan (HDHP): A type of health plan with a higher deductible than a traditional insurance plan. The monthly premium is typically lower, but you are responsible for more healthcare costs initially (your deductible) before your insurance plan starts to pay. If you have a high-deductible health plan, you are eligible for a health savings account.
- Preferred Provider Organization (PPO): A type of health plan that contracts with medical providers, such as hospitals and doctors, to create a network of participating providers. You pay less if you use providers that belong to your insurance plan’s network.
Quiz
How well do you understand tax-advantaged health benefit accounts? Take this quiz to help determine how much you know about these accounts and how you can get the most value from your benefits plan.
Understanding tax-advantaged accounts
Tax Savings: The Bottom Line
Don't miss out on savings: If you plan on spending even a dollar out of pocket for health care expenses, a tax-advantaged benefit account can stretch your dollars an average of 30% further (depending on your tax bracket).
Understand your options: Choosing the account that's right for you depends on the health plan you enroll in and the account features that are important to you.
Common Questions
Options, especially when using acronyms, can sometimes be confusing – FSA, HSA, etc. A flexible spending account (FSA) or health savings account (HSA) lets you use pre-tax dollars to pay for eligible health care expenses for you, your spouse, or eligible dependents. While both account types offer tax-free savings for eligible health care expenses, there are key differences to consider. Here are some things you should know:
| FSA | HSA | |
|---|---|---|
| Who can contribute – you or your employer? | Either | Either |
| Who owns the money – you or your employer? | Your employer | You |
| Can you carry over unused funds from year to year? | Sometimes; up to $500 | Yes |
| Can you keep the funds if you leave the company? | No | Yes |
| Can you invest the funds for growth (like a 401k)? | No | Yes |
| Can you change your election at any time during the year? | No | Yes |
Which plan is best for you?
Questions to Consider
Being able to answer the questions below will help you choose the plan that best suits your needs.
| How much is the premium? | This is the amount you must pay each month for your health insurance plan – some portion of which is covered by your employer. This is typically deducted from your paycheck each month. |
| How much is the deductible? | This is the amount you will owe for health care services before your health insurance plan begins to pay. |
| Could I afford to pay if I had to? | Pay attention to the out-of-pocket maximum – which is the most you'd have to pay out of pocket during a plan year in a "worst case" scenario. |
| Is preventative care covered? | This includes routine care such as screenings and checkups to prevent illnesses, disease, or other health problems. Very often, these costs are covered by your plan, even before your deductible is met. |
| How much will I have to pay to access care? | Some plans offer copays or fixed dollar amounts for specific services (office visit, urgent care, ER, etc.). Others require cost-sharing (coinsurance) for services – even after you've met your deductible. |
| How often does my family get sick? | Knowing how often you may need to go to the doctor can help determine how much coverage you need. |
| Am I expecting any major health care expenses this year? | If you are expecting larger expenses, like major surgery or childbirth, be sure to verify coverage and estimate potential out-of-pocket costs up front. |
| Will I be able to use my current doctors? | Check to see if your doctors are approved providers. Most plans will make you pay more for out-of-network providers. |
| Will my prescriptions be covered? | If you have recurring or frequent prescriptions, make sure you understand prescription coverage. In some plans, you will pay a copay, in other plans you will pay full price until a deductible is met. |
| What else can I do to lower costs? | Regardless of which plan you choose, chances are you will incur out-of-pocket costs. Tax-advantaged benefit accounts (such as HSAs, FSAs, HRAs) allow you to set aside pre-tax dollars for out-of-pocket expenses – stretching your dollar an average of 30% further (depending on your tax bracket). |
Let’s take a look at these resources to help you understand your plan options and get the right plan in place.
