Another open enrollment is quickly approaching, and the process of selecting the perfect health plan for you is quite frankly, still confusing. Can someone just give me the TLDR on PPOs and HMOs?
Something as important as your health and personal finances shouldn’t feel intimidating to navigate. We hope this Ultimate Guide to Open Enrollment helps change that for you. Most states kick off Open Enrollment on November 1st and close it out on December 15th. Be sure to check the dates for your state.
In a recent article on Elephant Journal, First Dollar’s co-founder and CEO, Jason Bornhorst made a great point that resonated with a lot of readers…
“Think about how much time, thought, research, and energy someone puts into buying a car. Now, think about how much time they might put into choosing a healthcare plan. How do the two compare? We only get one body, so our health should be one of our top priorities—if not the top priority. Therefore, we should put the same amount of time and effort into picking a health plan as we would for any other major purchase.”
There’s no better way to set the stage for Open Enrollment. This choice deserves just as much time, effort and research as any other big purchase because, hello! This is your life and health we’re talking about!
Yes, we know it’s alphabet soup over here, but we’ll go through it together! Let’s start with insurance-related terms you should know before picking a plan:
So now that you have all of these saved in your back pocket, let’s talk more about Open Enrollment, why you might be participating and how the process works.
Open Enrollment is the time of the year in which people can make changes to their health insurance plan, whether it is being purchased individually or supported by an employer. You can enroll in your employer’s insurance, switch to a new one, or even drop your existing plan. This typically applies to health, vision, dental, life, and disability insurance. We’re going to focus on the health insurance part.
The Patient Protection and Affordable Care Act established the Open Enrollment period so that people who need health insurance are able to access their options and sign up for a health plan. About 49% of the American population receives health insurance from employers, so that’s a good amount of people who are either uninsured or individually pay for their health insurance. In 2018, 27.9 million people in the U.S. were uninsured--an alarming number that we hope to see decrease with more accessibility and education surrounding health insurance.
There are plenty of reasons you might participate in Open Enrollment this year. Due to COVID-19, a lot of people have experienced changes in their jobs that likely resulted in a change in their health insurance. Additionally, many people have taken the curve balls thrown at them this year to choose the path of self-employment, in which case, choosing individual health insurance is really important!
Here are some more reasons for going through Open Enrollment:
We wrote another ultimate guide to taking your HSA with you through any career changes! Check it out for more information on jobs and the easy way to keep your HSA forever.
There are essentially two ways to participate 1) Select health insurance through your employer 2) Select health insurance from Healthcare.gov.
--Terri Bennett, Certified Financial Trainer at The Financial Gym
*Something important to note: if you decline to use an employer-sponsored plan, you can’t get premium tax credits for a marketplace plan unless your employer’s plan fails to meet minimum standards for coverage and affordability. Since employers usually pick up part of the bill, you could end up paying a lot more.
"Because everyone’s health profile is different, don’t choose the same plan as someone else just to “check the box”. Really think through how often you typically go to the hospital, get prescriptions, etc and furthermore how often you think you’ll be visiting in the new year.
Focus on your goals for 2021. My goal last year was to go to the dentist twice, visit the doctors once, and get a blood test once. With that, I knew I’d have some copays or prescription expenses. That made my 2019 open enrollment period easy because I knew (for the most part) what 2020 was going to look like!"
Now that your wheels are turning and you’ve taken notes on how Open Enrollment works, let’s talk about why high-deductible health plans (HDHPs) and health savings accounts (HSAs) are often overlooked. Don’t let the two words “high deductible” scare you because they are often followed by these three letters: HSA. And those three letters are anything but scary.
We fully understand that for a lot of people, paying for health insurance is one of the highest monthly costs right up there with rent and mortgage. What if you treated choosing healthcare like buying a new car? Yes, it really is that important and you should treat it that way. Chances are when you break it down and look at your costs, you might be overpaying for healthcare you don’t even utilize. Instead of those dollars just leaving your bank account, what if you could save that money and invest in your future? Well, that’s what choosing an HDHP with an HSA does for you.
Things to know: The 2021 contribution limit is $3,600 for individuals and $7,200 for families.
Let’s break it down with some simple math.
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Your employer could contribute to your HSA the same way they might contribute to a 401(k). This is just free money that can be used to take care of any healthcare costs you might encounter. If they don’t, you can still contribute to your HSA straight from the payroll pre-tax (more free money!).
Set up recurring contributions to your HSA and max it out if you can. Take it out for qualified medical expenses when needed. Not to mention, you earn tax-free interest on the money in your account.
One word: INVEST! Your HSA dollars can be invested pre-tax and grow tax-free. So basically more free money if you do it right.
"The biggest misconception about high deductible health plans that stops people from choosing them is that your healthcare decisions should be made based on your deductible. That is a faulty way of thinking. People tend to avoid HDHPs because they don't understand them. If you're in good health and don't expect to have significant medical expenses in the coming year, it would be wise to consider a HDHP. With a HDHP, you trade in a higher deductible for lower monthly premiums, meaning you get to keep more in your paycheck."
You made a good choice to save money on a monthly basis to put toward savings. Although you won’t have an employer contributing to the HSA, you can put aside what you might have been paying for a more expensive health plan and save it for qualified medical expenses.
Save, save, save. Put as much aside in your HSA as you can! This will take care of the out-of-pocket expenses before you meet your deductible and insurance steps in.
We can’t say it enough: invest! If you’re not using your HSA on qualified medical expenses, you can watch it grow tax-free when you invest. And when you do need it for healthcare reasons, you’ll have even more to use when you really need it!
🔥 FIRE Tip – I think that you should look at your situation holistically. It's not about, oh you must need a HDHP + HSA for early retirement, but more, does it make sense for you? If you are retiring early, you will need to buy insurance (unless you are so loaded that you can pay for all your healthcare using cash). HDHP + HSA are quite commonly available, and a HSA offers tax-advantaged ways to save, invest, and pay for health expenses. For people in early retirement, an HSA is an attractive way to lower your tax liability.
What is scary? A massive hospital bill when you choose to go without health insurance. While you do have to take on more out-of-pocket costs when going to the doctor or buying a prescription, your HSA provides a lot of flexibility to how you spend and save. Not to mention, choosing an HDHP provides you the option to both save on monthly premiums and to invest in your future with an HSA.
We can’t stress this one enough! So many people qualify for tax credits and they never know it. The federal exchange or your state marketplace will calculate this for you based on your yearly income and family size, and determine your eligibility.
Maybe we’ve mentioned this a few times...but we’re mentioning it again. At First Dollar specifically, your HSA funds can be invested in 3,000+ stocks, mutual funds, & ETFs. The opportunities to make your HSA go even further are endless, so take advantage. No other savings vehicle out there has this kind of power! Plus, when you turn 65, your HSA turns into a traditional retirement account and all of your savings and investment returns can be used for anything.
HSAs belong to YOU, not your employer, spouse or anyone else. So when you choose to open and save with your HSA, it’s yours forever and will stay with you through it all. Even if you choose to switch to a healthcare plan that doesn’t support HSA contributions, you can still use the funds on qualifying medical expenses. Additionally, you can have as many HSAs as you want! Have one for savings, one for investing, one for spending and anything else you can think of!
HSAs aren’t on a specific schedule like Flexible Spending Accounts (FSAs) or Health Reimbursement Accounts (HRAs). As long as you choose an HSA-eligible HDHP, you can open and fund one anytime. So if you’re not in a place where you can set aside savings in your HSA just yet, you can set new goals and fund it when you’re ready! Just make sure you choose an HSA provider that doesn’t charge maintenance fees (hint: First Dollar doesn’t).
Once you’ve experienced Open Enrollment in one way or another, you know what to expect should you need to switch your plan again in the future. Whether you choose an HSA this time around or keep all of this information in your back pocket for the future, choosing an HSA is truly taking a step toward investing in you and your family’s future. So if you’ve been on the fence about what direction you want to go during Open Enrollment this year, consider this article a sign. And if you want a cool home for your new (or old) HSA, join First Dollar today.
Understand your needs and don't participate in Open Enrollment blind; it's not about crossing something off your to-do list. Go in with questions and ask every last one of them. Treat this decision making process like any other expensive, important purchase in your life.
