Open Enrollment 101: What You Need to Consider

Open enrollment season is upon us. Here are some things to keep in mind as you decide whether to change your plan for the coming year.

Author:: Matt Brownell
Publish date:: Oct 28, 2011 7:00 AM EDT

As we approach the season where Americans are opening their wallets to splurge on Christmas gifts, you can take the opportunity to do some saving. Yes, open enrollment season is here, the time of year when employees can get down to brass tacks and make some real changes to their employer-sponsored health insurance plan. Whether your family situation has changed in a way that impacts your insurance needs, or you simply want to pay less in premiums, you should put some serious thought into the decisions you make in the next couple of months. Here’s what the experts say you should consider. Photo Credit: Getty Images

Perhaps this goes without saying, but the biggest asset you can bring to the process is your time. As in, actually taking the time to dig out your current benefits package and then shopping around for alternative plans and, if possible, providers. “The first thing [employees] need to be doing is not taking that benefit package and putting it in their desk and never looking at it again,” says Carrie McLean, consumer insurance specialist for eHealthInsurance, an online source of health insurance. “They just go on autopilot and don’t think about it, and they need to be thinking about it.” This is especially important since many employers are raising cost for employees, McLean adds. How much are they raising those costs? The National Business Group on Health says insurance costs are expected to rise by 7.2% in 2012, and according to Towers Watson, an HR consulting firm, two-thirds of all mid- and large-sized companies will be raising their employees’ health insurance premiums next year. Photo Credit: Getty Images

One of the biggest factors in rising premiums? New federal laws mandating that children up to age 26 can be kept on as dependents on your plan. As such, these dependent plans in particular have gone up in cost, so you may want to look into getting them on separate plans to see if it’s more cost-effective. “We’ve gone through a year of employers feeling the effects of older adults staying on the plan, and they’re going to be raising those premiums,” says McLean. “Just because the government says you can keep your kids on, doesn’t mean you have to.” Of course, some people may balk at the idea of being on a different insurance plan than other members of their family – they may, for instance, like the idea of having one family doctor, which may not be possible if everyone’s on a different plan. “People think everyone has to be on same plan, but you need to consider having your husband and kids move to an individual plan,” says McLean. “Don’t be afraid of having another plan. If it’s going to save you thousands of dollars, it makes total sense.” Photo Credit: Getty Images

Obviously when you’re considering switching to a new health insurance plan, you’ll want to look back at how much you’ve been paying – not only your monthly premiums, but also how much you spent on co-pays. If you became a frequent flier at the doctor’s office, for instance, you might consider switching to a plan with higher premiums and lower co-pays. But you should also be looking ahead. What if, for instance, you and your spouse are expecting a child in the coming year? “I would look to find out what is the lowest amount of out-of-pocket expenses [possible],” says Chris Schumacher, an adviser for Ameriprise. “Consider the deductible of hospital visits and birth itself.” Obviously we can’t anticipate every future ailment or hospitalization; that uncertainty is why we get insurance. But in those rare scenarios where you can predict how often you’ll be visiting the hospital, you should take advantage and prepare accordingly. Photo Credit: Getty Image

Health insurance premiums don’t cover everything related to your health. There are co-pays, prescription drugs and other pharmacy items. Flexible Spending Accounts and Health Savings Accounts both provide tax advantaged ways to deal with such expenses – you can put pre-tax dollars in the accounts, meaning that you can reduce your overall tax liability. The difference is that the money in an FSA must be used by the end of the year; an HSA, which requires a high-deductible health plan, allows you to roll over the savings from year to year. To get a better idea of which account is better for you, check out MainStreet’s comparison of HSAs and FSAs. And if you go with an FSA, make sure you evaluate how much you spend on medical expenses in a given year – you don’t want to overestimate and find yourself scrambling to spend what’s left of the account at the end of the year. Schumacher says he strongly advises clients to go with an HSA. “We feel that 20 to 30 years down the road, Medicare won’t look the same as it does now,” he says. “You’re going to be responsible for paying for health care costs.” Photo Credit: Getty Images

There’s a simple way to tell if you’re spending too much on health insurance: Look at the average premium cost and see what side you fall on. Last year the average individual paid $167 a month in premiums, says eHealthInsurance. And those numbers are, of course, going up at a rate eclipsing both inflation and possibly any raises you may have received. “Health insurance costs are rising by 7.2%,” says McLean. “If you just got a 3% raise but they’re charging 7% more for health care, you’re not keeping up.” Photo Credit: Getty Images

For some people, the main out-of-pocket health care costs aren’t even for them, but a child or elderly parent in their care. A Dependent Care Account, offered by some employers, functions similarly to an FSA but is intended for the health care costs associated with, well, a dependent’s care. And just like an FSA, it’s a powerful tool for reducing your tax burden by setting aside money you’re going to use anyway. Photo Credit: Getty Images

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‘Tis the Season

As we approach the season where Americans are opening their wallets to splurge on Christmas gifts, you can take the opportunity to do some saving. Yes, open enrollment season is here, the time of year when employees can get down to brass tacks and make some real changes to their employer-sponsored health insurance plan. Whether your family situation has changed in a way that impacts your insurance needs, or you simply want to pay less in premiums, you should put some serious thought into the decisions you make in the next couple of months. Here’s what the experts say you should consider. Photo Credit: Getty Images