Open Enrollment 101: What You Need to Know

NEW YORK ( MainStreet) -- As we approach the season in which Americans open 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 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 affects 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.
It's health plan open enrollment season, and you should consider making plan changes rather than remaining on auto-pilot.

Take off the "auto-pilot"
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 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 midsize and large companies will be raising their employees' health insurance premiums next year.

Consider booting the kids
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 adult children staying on the plan, and they're going to be raising those premiums," McLean says. "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," McLean says. "Don't be afraid of having another plan. If it's going to save you thousands of dollars, it makes total sense."

What does your future hold?
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.

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 pretax dollars in the accounts, meaning 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 our 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."

Are you above average?
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 inflation and possibly any raises you may have received.

"Health insurance costs are rising by 7.2%," McLean says. "If you just got a 3% raise but they're charging 7% more for health care, you're not keeping up."

Consider a dependent care account
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.

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