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How to Get Health Insurance During Open Enrollment

Oct 12, 2020 3 min read Ilana Polyak

Key takeaways

  • Decide if your plan works best for your life today.
  • Healthy and young? A higher deductible plan might work.
  • Add flexibility by taking advantage of HSAs or FSAs.

 

Ask yourself this question: When is my open enrollment period? Remember, as the fall nears its end, and the cool, crisp air moves in, it’s about time to select your health insurance coverage for next year. This is when you learn how much health insurance will cost, as well as your chance to determine which package of benefits best matches your needs. While you may be satisfied with your current plan, it’s always a good idea to comparison shop during open enrollment.

 

 

It’s also the time when you should ask important questions, including: Are health insurance premiums tax deductible? (Yes, in certain circumstances.) And if your health or family status has changed over the past year, should you look into a new plan? Your employer may have also added benefits this year that can help you make the most of your health care. These are some of the items you should consider as you select your plan.

 

Two insurance plans or one?

What do you do if both you and your spouse have health coverage at work? It’s decision time, because doubling up may not be cost effective. Employees often pay a portion of the premium, and any charges that the secondary insurance picks up may not be sufficient to offset the additional premium.

You may cover your whole family with one spouse’s plan, or you may opt to each have your own plan. If all things are equal, then choose the one that has the lowest premiums and deductibles.

But often, plans will differ based on the coverage provided. Look very carefully through the plans to determine which one offers the best options for covering the medical services you and your family use most often. It may be a tedious process, but it’s worth doing before committing to health coverage for the year—even if you’re worried you’ll have to switch doctors and networks when you move to new coverage.


Consider the deductible

If you’re healthy, young and not taking much time off of work to visit the doctor, a high-deductible health (HDHP) plan may make the most sense. In these plans, patients pay out of pocket for most procedures or appointments until they meet the deductible. After that, the plans pick up 100% of most costs. (Some plans have tiers: For example, once you've paid a certain amount, the plan may pick up 80% of costs until you hit an annual out-of-pocket maximum; after that, the plan pays 100%.) In exchange, premiums are generally lower than traditional health insurance plans.

Bear in mind that, in the event of a major health problem, you might be looking at a very large bill to pay all at once. Compare that with a traditional plan, which lets you spread out your health care expenses throughout the year.

Also, remember that basic health insurance is just one type of coverage you might need to maintain good health. Because there's a strong connection between oral health and general health Opens in new window, a dental policy that pays for cleanings and basic dental care is a good idea.

 

Take advantage of savings

High-deductible plans are often paired with health savings accounts (HSAs), which let you and your employer contribute up to $3,600 for singles and $7,200 for families, pre-tax. Withdrawals for medical care are tax-free, and there’s an investment option for the money as well.

If you are relatively healthy, using the investing option can help you save for health care in retirement. Any money you don’t use on health care now can continue to grow. It can grow even more if you have other funds you can use to pay for your health care expenses now.

 

Stay flexible

To help pay for health-related expenses, many employers offer flexible spending accounts (FSAs), which let you put aside up to $2,750 a year in a separate account, pretax. The only catch is that most of the money must be used by year-end. Otherwise, you’ll forfeit the balance.

Employers can let their workers carry over $500 into the next year. Or employers may allow a two-and-a-half-month grace period for using up the funds at the beginning of the next year. Be sure to find out your company’s policy.

A large number of expenses can be paid for with an FSA, including doctors’ co-pays, deductibles (but not premiums), out-of-network costs and prescriptions. The Internal Revenue Service Opens in new window site has a full list of permitted medical expenses.

Also note that, except for "limited-purpose" FSAs that cover only dental and vision care costs, you can't use an FSA if you have a high-deductible plan with an HSA, and vice versa.

 

Consider disability insurance

Disability is more common than you may realize. A 20-year-old has a one in four chance Opens in new window of suffering an illness or injury that keeps him or her away from work before retirement age, according to the Social Security Administration.

You may be healthy now, or not want to think about the possibility of having a debilitating condition in the future, but the fact is, the time to think about it is exactly when you are still healthy and functioning. Life is unpredictable, and preparing now should make things a lot easier to manage if the worst happens.

Disability insurance can replace a portion of your income if you are unable to work. Your employer is a good place to start looking for this coverage. Work-based disability insurance can be more affordable than plans purchased on your own, and there is no medical exam.

Aim to replace 60% to 70% of your income with a policy. (Some work-related expenses will no longer be in your budget.) If you can’t get enough coverage at work, consider supplementing the policy with an individual plan.

 

What you can do next

As health care costs continue to rise, use open enrollment season to make sure your insurance plan is the best one for your current situation. And be sure to take advantage of the other benefits, such as FSAs or HSAs, that can help you take some of the sting out of health care costs. Once you’ve selected your plan, you’ll also need to budget out your expenses. Here’s how to make a budget, now that you have your health insurance costs set, so you can keep your other life goals in line.

Footnotes

 

Ilana Polyak is a freelance writer who specializes in personal finance and the financial advisory industry. Her work has appeared in The New York Times, Barron's, Kiplinger's Personal Finance, Bloomberg BusinessWeek and CNBC.com.

 

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