Best Open Enrollment Choices as Health Care Insurance Continues to Rise

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According to preliminary results from their annual survey of 1,600 employers, Mercer expects employee health care benefit costs to increase by 5.4% next year. You will likely see these costs via higher monthly premiums during your organization’s open enrollment period. Fortunately, there are some things you can do to to mitigate the impact of rising costs and fewer benefits.

Understand your health insurance needs. This means spending some time estimating what your health care costs over the last few years were and planning for any major life changes in the year ahead (e.g. potential new job, pregnancy or elective surgeries). Once you do this, look at the plans offered by your employer and see which ones best meets your needs without the expensive extras you are not likely to use.  If you are in a two worker/income household then do the same exercise with your spouse’s open-enrollment packet to see which plan offers the best value. This was my situation and based on a comparing our employer plans, we saved over $50 per month on our premiums by getting medical coverage via my company, but dental, vision and FSA through my wife’s plan.

Consider moving to a consumer-directed health plan (CDHP) with Health Savings Account (HSA) to deal with higher deductibles. More employers are nudging workers toward high-deductible health plans because they cost less — about 15 to 20 percent less than a P.P.O. or an H.M.O. — and they force employees (consumers) to take more responsibility for their health care. To offset the higher deductibles employers are providing a HSA to offset the higher deductible (e.g. if the deductible is $5000, employers many contribute $1000 to a HSA). If you spend all the money in the health savings account, you then have to dip into your own pocket to pay your medical bills until you exhaust the deductible. But if you don’t spend the money, it stays in the account for next year’s expenses. So compare the cost (using an average for yourself and family over the last 3 years) to determine is a regular plan or a HSA based plan is a better option for you. If you are relatively healthy then a employer subsidized HSA based plan could be the better option than your standard plan.

Take advantage of wellness or get fit programs offered during or shortly after open enrollment. Most employer sponsored plans now offer some kind of monetary discount if plan participants partake in some kind of fitness program or demonstrate they are taking actions to stay in shape (normally determined through a questionnaire). The reason is simple: healthy people are less likely to get seriously sick and so the insurance company has to pay out less. Employers, benefit from healthy employees due to higher productivity (less sick days for example) and it also decreases the amount of money they spend on health coverage. So if you can take advantage of these programs, do so. It is good for your well-being, employer and your wallet.

Boost your medical flexible spending account contribution for 2010. If your employer is increasing deductibles and co-payments for your health insurance, as many are, then it’s a good idea to put more money into your flexible spending account (3,000 to $5,000 max per year). Because your FSA contributions avoid income and Social Security taxes, you can save 35% or more compared with spending after–tax money on these medical expenses. But you must use the money by December 31 (or March 15 of the following year, in some plans) or lose it.

Look at external plans. For folks in smaller companies this may be a better option than what their employer offers. Particularly because you can mix and match your health coverage and deductible choices to more closely meet your coverage needs and budget. Your best bet is to go to top insurance portals like eHealthInsurance to get free quotes from multiple providers based on health care options you want.

My final tip, and most important in the long term, is to educate yourself about health insurance options and all the key terminology/concepts. Not only will it save you money in choosing the best option, it will help during the year when dealing with doctors, hospitals and billing staff when trying to figure how much you will or should pay for medical services. A good place to start is the educational information offered by your company and their insurer (online or via open enrollment meetings). Understand and learn what the basic terms mean. Co-payments vs.co-insurance? How does my deductible work? What is an “out of pocket maximum” and when does it apply? Be sure you understand “‘in-network” versus “out of network”. Seeking services “out of network” is often the source of denials or increased share of costs (co-insurance) paid by you. Again, don’t be shy or embarrassed – a lot of people don’t really understand their health insurance and end up paying too much and/or not taking advantage of the benefits their plans can offer. Always ask questions if you are not sure of certain concepts and particularly before seeing a medical professional to ensure you are adequately covered.

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{ 3 comments… read them below or add one }

Barbara September 30, 2011 at 9:52 am

Military retiree’s should also take heed – As of Oct. 1, 2012 fees for Tricare Prime coverage will increase by $30, to $260 a year, for individuals, and by $60, to $520 a year, for retirees with families. Health care costs are going up everywhere.

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Tom Ainsworth September 26, 2011 at 11:24 am

You really SHOULD update the text of your article to reflect accurate information for 2011, such as the lower cap placed on medical spending accounts going forward ($2,500) due to the passage of the “Obama Care” bill.

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andys2i September 26, 2011 at 12:48 pm

Tom – The lower cap is only effective from 2013. For 2012, the existing cap ($5000) still holds. Also the cap of $2500, from 2013, is on a per worker basis. So if husband and wife both work, the total cap is $5,000.

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