During September through December, many employers hold an annual open enrollment period to sign up for the next year’s benefits.
Many people blindly copy what they did the previous year but you should use the open enrollment period to better educate yourself on your employer’s benefits package. If your company or organization sent you any materials in the mail, take a look at them and familiarize yourself with what’s available and any changes from the previous year.
Note that the open enrollment period usually occurs in the 4th quarter of the year before the benefits take effect in January of the following year.
Exceptions Granted for Qualifying Life Event
A qualifying life event (QLE) is a change to your living situation that may make you eligible for a Special Enrollment Period, allowing you to enroll in health insurance outside the yearly open enrollment period.
Examples of Qualifying Life Events:
- Marriage
- Birth of a child
- Adoption of a child
- Divorce/separation
- Death in the family
- Relocation
What Options Should You Choose During Annual Enrollment
Depending on your employer benefits package, you might have lots of options to choose from. I’ll highlight where you should pay attention and provide some tips to maximize your benefits.
Health Insurance/Medical Plan
Assess your medical plan options.
The following table provides a high-level overview and comparison of typical medical plans that you may see. This might not fully reflect your plan offering so refer to your plan documentation for details.
To pick a medical plan, it’s a good idea to compare to what you spent this year and perhaps the year before.
Keep records of all your medical expenses each year and store receipts in a folder for each calendar year. It might take some time to gather this material but it’s time well spent. How many times did you go to the primary care physician, specialists and Emergency Room? How many prescription drugs did you buy?
This information can help you narrow down and choose the right plan. Use your health care claims history to estimate your expected medical and prescription drug costs to make the most informed decision for the next year.
A High Deductible Health Plan (HDHP) might save you money
If you are young and healthy, the high deductible health plan may be your best bet. High Deductible Health Plans (HDHP) may help you pay less for insurance. You’ll have higher out of pocket costs than many of the other medical plan types but if you reach your deductible, the plan pays 80 to 100% of your care. A HDHP generally has lower premiums compared to other plans but it has a higher deductible before the plan pays. The deductible is at least $1,400 for an individual or $2,800 for a family and cannot exceed $7,050 for an individual and $14,100 for a family in 2022. As with all plans, preventive care, like an annual physical exam, is free, even if you haven’t met your deductible.
High Deductible Plans include Healthcare Savings Account (HSA) to help pay for care. The HSA is triple tax advantaged.
What does triple tax advantage mean?
- Contributions are tax free
You contribute pre-tax dollars via payroll deductions and any contributions you make directly to your account could be tax deductible
2. Tax Free Growth
Any interest or earnings from the account grow tax-free
3. Tax- free withdrawals
You can pay for qualified healthcare expenses (including medical, dental, and vision expenses) on a tax-free basis
Some employers may contribute to your HSA to encourage you to sign up.
Consider paying current medical expenses out of pocket and use the Health Savings Account (HSA) like an IRA to invest and draw from the account when you retire. If you invest your contributions, they can grow tax free and be used to pay for medical expenses in retirement.
In 2022, Health Savings Account (HSA) contribution limits (employee + employer) cannot exceed $3,650 for an individual and $7,300 for a family.
An HSA is a tax break for a high income earner. If you have extra money to invest and you are on a qualified high deductible medical plan, a HSA is a great way to grow your money and use it later in life when you’ll need money to pay for medical expenses.
From an investing standpoint, Health Savings Accounts (HSA) are powerful investment vehicles. When your balance reaches $1000, some plans allow you to invest into mutual funds. Look for low fee index funds such as the following:
- Total stock market index institutional (Ticker: VITSX)
- Total international stock market index admiral (Ticker: VTIAX)
- Mid-cap index admiral (Ticker: VIMAX)
- Small-cap index admiral (Ticker: VSMAX)
- Total bond fund admiral (Ticker: VBTLX).
Note: New Jersey and California have specific tax laws where you should consider talking to a tax professional.
Check your program’s eligibility for HSA enrollment.
Your Healthcare Savings Account (HSA) is portable and is considered your money. It’s an individual account owned by you. If you switch jobs, you can take it with you. You can only contribute when you are enrolled in a high deductible plan. If you stop the high deductible plan, you can no longer contribute to the account (but you can invest it and let it grow).
Money Saving Tip: Look at the fees that your HSA provider charges and keep your eye on the account if you change jobs. Some platforms have an inactivity fee that slowly drains your account. Instead, consider moving your HSA account to a provider that has low or no fees such as Fidelity.
Healthcare Flexible Savings Account (FSA)
With a Healthcare Flexible Savings Account (FSA), you can set aside before-tax dollars for certain medical, dental, and vision expenses. You contribute pre-tax dollars via payroll deductions. If you have a Healthcare Savings Account (HSA), you can’t have a Healthcare Flexible Savings Account (FSA). The annual amount you elect to contribute will be deducted in equal increments from each pay period.
These funds can only be used for the benefit year. If you don’t use it, you lose it. According to IRS rules, you can carryover $550 into the next year but check with your employer if they allow this in its plan. If you miscalculated your healthcare expenses and you don’t want to lose the money, you may have to rush at the end of the year to spend hundreds of dollars on FSA-eligible medical expenses.
Save your receipts. Sometimes you’ll need it as proof that a product or service was FSA-eligible.
Even with the best plans, I cannot always predict the future and my health. For instance, I went through my FSA allocation in 3 months since I had a few visits to the doctor and two trips to the emergency room.
Money Saving Tip: If you have particular doctors that you use, make sure they are in-network for the plan that you ultimately choose. After getting a ridiculously high out of network doctor’s bill, I double and triple check that doctors and specialists are in-network providers on my plan.
Dental Plan
You should go to the dentist at least twice a year at least to receive diagnostic and preventive services. Dental services are hard to predict. One night when I was out to dinner, I cracked a molar and ended up getting a crown. Dental work such as dental implants, root canals, crowns, prosthetics, minor and major surgery can be pricey.
The most common dental plans are Preferred Provider Organization (PPO) and Dental Health Maintenance Organization (DHMO).
A PPO is a plan that has in-network dental providers who agree to pay a set fee for dental services. If you go out of network, be prepared for higher out of pocket expenses.
A DHMO is similar to an HMO. Usually, you identify a particular dentist and receive all dental care from that dentist. DHMO networks tend to have more limited choice when it comes to providers. This is usually the cheaper option where covered services are provided at no cost to you while more significant services may require a co-payment.
Vision Care
It’s good practice to have your eyes checked every year. Some people may skip this vision appointment but the exam can help identify issues that may be treatable if a doctor catches them early.
If you don’t need a pair of glasses or contacts each year, consider the costs of your vision plan. The plan pays for itself if you get a pair of glasses or contacts each year.
Money Saving Tip: Most people get an eye exam and then buy glasses or contacts at a huge markup from the doctor’s office. Ask your eye doctor for a copy of your prescription for glasses and/or contacts. Note that the prescriptions are different for glasses and contacts and are not interchangeable.
Comparison Shop for Glasses for the best deal
Consider these low-cost providers when searching for a new pair of glasses:
- Warby Parker
- Zenni Optical
- Online stores such as glassesusa
- Costco Optical
Money Saving Tip: Earn additional cash back on your purchases by using Rakuten or Ibotta in addition to any online coupons you may find.
Find the Best Deals on Contact Lenses
For contacts, I search google for the exact brand and input my prescription details. Note any coupons or promotions on the homepage of the site. I find 1800contacts to be just as expensive as getting from the doctor’s office. Comparison shop online and go all the way to checkout. The reason I say advance to checkout is that many online contacts vendors charge very high handling, processing, or shipping fees which only become visible at checkout. Look around and compare. I’ve bought contacts that would have cost me $55-60 a box for $20-25 a box.
Depending on where you purchase your contacts or glasses, your vision plan might consider these locations to be out of network. Many vision insurance companies will reimburse you to a certain amount for out of network benefits. Calculate the out of pocket expense for a year’s supply of contacts or glasses.
The cost savings of shopping around plus the out of network reimbursement from your vision plan is usually much cheaper than whatever your eye doctor can offer.
Example of How to Save on Glasses or Contacts
Let’s use an example.
Assume you get an eye exam and contact fitting and it costs $80. If you purchase the contacts in the doctor’s office, it would cost $80 per box per eye and you need 4 boxes for a year’s supply totaling $320. Since the doctor is in-network, your vision plan provides a $200 benefit so you’re total out of pocket expense is $200.
Now, you get an exam and contact fitting at the same location and it costs $80. Now, instead of purchasing the contact lenses in the doctor’s office, you bought them online. With coupons, the total is $40 per box per eye and you need 4 boxes for a year’s supply, totaling $160. Since this was an out of network purchase, your vision plan only provides $100 in savings which they send you as a reimbursement check. Your total out of pocket expense is $140.
Total Out of Pocket: $200 at the Doctor’s Office vs $140 from shopping online, a 30% savings!
Of course, depending on your situation and brand, the savings could vary.
Finally, if you don’t get fully reimbursed by your vision insurance, you can use your Healthcare Flexible Savings Account (FSA) money to make the purchase. Alternatively, you can make the purchase and submit the receipt for FSA reimbursement.
Many optometrist offices are small businesses and have to maintain staff, rent, and other overhead. Feel free to support local small businesses. I don’t want to put anyone out of business but I do want to show people that they have options when it comes to buying glasses and contacts.
Money Saving Tip:
If you are considering Lasik surgery, your vision insurance should provide a discount. Also, consider the cost of Lasik surgery when funding your FSA for the year.
Other Healthcare well being
Some plans offer well-being incentive programs that allow you to earn cash for completing activities that promote mental, physical, social and financial health. In the past, just getting my annual physical was enough to save some cash and lower my medical plan premium.
With the pandemic, many employers are offering free or reduced cost to access apps and services. Benefits vary greatly but see what your plan offers and take advantage. Some employers have programs where employees can dial a financial advisor and get free financial advice from a professional. Other programs may include access to stress reducing and meditation programs.
Legal Insurance is a newer benefit that I’ve started seeing employers offer. Legal Insurance plans, such as ARAG or MetLife Legal Plans, address a wide range of legal matters such as buying a home or writing a will. These plans typically are about $20 a month to get legal advice and is fully paid for covered legal matters.
I recently started participating to complete wills and trusts. For many legal issues, it’s sometimes difficult to find an attorney who will agree to your case (or even respond to your calls and emails). I think network attorneys are paid by fixed amounts and they might prioritize other paying customers over you.
With that said, I’ve worked with some really good ones but some are not great and I sometimes question the value of this benefit.
Reduced Cost Employer Sponsored Life Insurance
Some employers cover basic life insurance. As part of your employee benefits package, you may have the option for group term life insurance. This is a nice perk where your employer may pay some or all of the premium costs. If you have dependents that rely on your income, it might be wise to think about how much life insurance is needed to cover expenses in the case of death. Some recommend that you should have 6 to 10 times your annual salary. See what your employer’s plan coverage covers and consider supplemental coverage. If you don’t have dependents that rely on your income, you might not have to worry. It depends on your circumstance, you might not need the coverage unless you want to cover the funeral expenses or have co-signed student loans or other debts where you don’t want to leave someone else stuck with the expenses.
With this type of life insurance, consider that you may lose coverage if you change jobs.
Reminder:
During your open enrollment period, it might be a good idea to schedule your physical exam for next year. Most of the time, physical exams are fully covered by medical plans. Set up the appointment and put it in your calendar!
While you are at it, schedule your eye exam and dental cleanings.
Please note that I am not a financial advisor and all views expressed in this post are my own and do not represent any employers or entities that I may be affiliated. Consult a financial advisor and/or tax professional before investing.
