FIRST DOLLAR's EXPERT GUIDE

The Ultimate Guide To Open Enrollment

OPEN ENROLLMENT HANDBOOK

Getting Started

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!

WTF are all these acronyms?

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:

  • A health insurance premium is the monthly fee you pay your insurance provider for coverage
  • The deductible is the amount you pay for services before your health insurance kicks in. (For example, if your deductible is $2,000, you’ll need to reach that amount out of pocket before your insurance takes over.)
  • A copay is the fixed amount paid by a patient during an “in-network” (different from, duh, “out-of-network”) doctor’s visit.
  • Coinsurance: is the percentage of costs (say, 10% or 20%) paid by a patient for in-network services before their health insurance takes over the rest of the payment if the procedure is covered.
  • And out-of-pocket expenses are medical care costs not covered by your insurance that you need to pay in full yourself. Everyone’s favorite, right? (Not.)
  • A Health Savings Account (the reason you’re here) is a triple-tax advantaged savings vehicle to support a high-deductible health plan. It belongs to YOU and no one else.

Here are the different insurance plans you’ll be able to choose from: 

  • PPO (Preferred provider organization plans): This is currently still the most popular plan of choice for the masses, but maybe not for long. Essentially, you pay less money to use providers that are already in the plan’s network. You can access specialists outside of the network without a referral at an additional cost. PPOs monthly premiums vary, but tend to be the most expensive of the options; the average PPO is around $560/month.
  • HMO (Health maintenance organization plans): HMOs allow covered individuals to use any provider within an extended network as long as you’ve chosen a primary care physician (PCP) who coordinates the additional care (e.g. specialists). Generally, this plan won't cover out-of-network unless for emergencies. The average premium for an HMO is around $480/month.
  • EPO (Exclusive provider organization plans): An EPO is a managed care plan where services are covered only if you use doctors, specialists, or hospitals in the plan’s network, except in the case of an emergency. Often, EPOs do not provide coverage for services outside of the EPO network, so it’s important to check providers in the network! The average monthly premium for an EPO is about $490.
  • POS (Point-of-service plans): This is basically a combo of the traditional HMO and PPO plan. You’re able to see any provider within a large network and choose a PCP. You are also free to use specialists that might be out of network, but will more than likely pay higher amounts to do so. The average premium for a POS plan is about $510.
  • HDHPs (High-deductible health plans): Well, for obvious reasons, this one is our favorite (HSAs, duh!). HDHPs mean you pay a lower monthly premium but have a higher deductible to reach before insurance steps in. To help offset out-of-pocket costs, qualified HDHPs come with a health savings account (HSA) in which you can put in money tax-free, grow it tax-free through investments, and take out money tax-free to pay for qualified medical expenses! Lots more to come on these bad boys. You can expect to pay about $405/month for your premium. Please note: An HDHP can come in the form of an HMO, PPO, POS or EPO. It simply relies on the deductible to determine its status as an HDHP.

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.

insurance keywords
INSURANCE TYPES
let's go!

So, what is Open Enrollment and why does it exist?

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.

What are some reasons I should participate in Open Enrollment?

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:

  • You want to change the employer-sponsored health plan that you’re on right now.
  • You recently switched jobs and now is the best time for you to choose a new plan.
  • You do not receive health insurance through your employer and need coverage.
  • You are self-employed and need coverage.
  • You are retired and need coverage.
  • You are unemployed and need coverage.
  • You don’t like the options provided by your employer so you want to individually pay for coverage.
KEY TO SUCCESS

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.

Tell me more.

How does Open Enrollment work?

There are essentially two ways to participate 1) Select health insurance through your employer 2) Select health insurance from Healthcare.gov.

1: Changing or choosing an employer-sponsored health plan.

  • Talk to HR. HR departments will often send out marketing materials and information surrounding the plans they offer. Take the time to talk to them to ensure you’re making the best decision for YOU! 
  • Ask questions. Determine your healthcare needs and how much you’re able to spend and ask any question you need to make sure you’re getting what you need. For example, is the high-deductible health plan they offer HSA-eligible? And do they contribute to the HSA? Important things to know, folks! 
  • Choose and enroll. After getting all the necessary information, follow your employer’s instructions to enroll in the plan of your choice!

“Take the time to know what options are available to you during open enrollment! If you don’t know what benefits your company offers, you can't make informed decisions about which benefits to take advantage of, and you could be leaving money on the table. The open enrollment period is finite, so schedule time to acquaint yourself with options and leave some wiggle room to take to HR in case you need further clarification.”

--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.

2: You do not have health insurance through an employer and need to pick an individual plan on the exchange.

  • Find your marketplace. First, find out if your state has a Healthcare Marketplace. If it does not, you can use Healthcare.gov or a provider like Catch. Just enter your zip code into Catch and they’ll help you find a plan or direct you to the correct marketplace depending on which state you live in. 
  • Go in with a plan. Know what type of coverage makes sense for you and what you are willing to spend on healthcare. There are plenty of people you can bring the important questions to during the decision making process--call the marketplace hotline, consult a local health insurance broker, etc. Don’t skimp on getting your questions answered—this is your health we’re talking about!
  • Know the cost. You will probably pay more out-of-pocket on health insurance premiums than those with employer-sponsored plans because employers often pick up part of the cost.
  • You might get tax credits. Using Healthcare.gov or state marketplaces often means you could be eligible for certain tax credits to lower your monthly premiums! In fact, almost 80% of those participating in Open Enrollment in this way are eligible for lower premiums. 
  • Enroll! You’ve done the research and asked the right questions. All that’s left to do is enroll!
"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!"
– Marc Russell
The fun part.

Why you should consider choosing an HDHP + HSA during Open Enrollment

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.

“[HDHPs] scare people because it's synonymous with a big out of pocket cost. But, combining this with an HSA really is a powerful tool, especially if you don't need much care. But hey, a $7000 deductible is better than a $100,000 bill if you do end up having an emergency. – Nikki Dunn, CFP (@shetalksfinance on IG)

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.

Choosing an HDHP + HSA through your employer

What this means

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!).

Your best action plan

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.

Other ways to optimize

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."
– Leo Jean-Louis
Money Coach
@leo.jeanlouis on IG

Choosing an HDHP + HSA in your state marketplace or on Healthcare.gov

What this means

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.

Your best action plan

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.

Other ways to optimize

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.
– Shang
MBA • Money Coach • FIRE Advocate
@savemycents on IG
You're ready!

Key takeaways to keep in mind going into Open Enrollment


“High deductible” is not as scary as it sounds.

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.

Find out if you’re eligible for tax credits.

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.

Have we mentioned investing?

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.

Keep your HSA forever.

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! 

You don’t have to open an HSA immediately.

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).

The future of your HSA.

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.

THE KEY TO SUCCESS

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.

A better HSA in every way.