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It’s the time of year when Most companies hold their open enrollment periodsduring which employees decide on their benefits for the next 12 months.
Many people mistakenly think they don’t need to change their selections from the previous year, said Jonathan Gruberprofessor of economics at the Massachusetts Institute of Technology and former president of the American Society of Health Economists
“But every year there may be new choices, as well as changes in your situation,” Gruber said. “Take the time to reconsider these decisions.
“The consequences could be very significant savings,” he added.
Here are the four key steps to take when conducting open enrollment in your workplace, according to experts.
Open Enrollment Workplace Checklist
Savings and Spending Accounts
Dental and visual plans
Selection of beneficiaries
Typically, employees are offered two health insurance plan options: one with a higher monthly cost (called your premium) and a lower deductible (the amount you’ll have to pay out-of-pocket before your employer’s plan comes into effect), and another option where it’s the opposite, you pay less each month but you have to reach a higher amount before your coverage begins.
If you are in perfect health and only go to the doctor, for example once a year for a check-up, you can opt for the so-called high deductible plan, with the lowest monthly cost. supposedly preventive serviceslike wellness checks and certain vaccinations, should be free regardless of whether you’ve met your deductible, said Caitlin Donovan, a spokesperson for the National Patient Advocate Foundation.
Gruber said that in many cases, “a high-deductible plan will be a better deal because the premiums are much lower.”
On the other hand, paying a higher premium up front will give you more certainty about your out-of-pocket expenses over the course of the year, especially if you need to go to the hospital, said Jean-Abraham, health economist at the University of Minnesota. If you have an illness, want to see multiple doctors, or try different treatments in 2024, it may be better to have a lower deductible so you can then benefit more from your workplace coverage.
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“There are obvious tradeoffs,” Abraham said. “Individuals differ in their risk preferences.”
You’ll need to look beyond your premium and deductible to find out what your annual health care costs will be under different plans, Donovan said.
Also consider the plan’s coinsurance rate, which is how much you’ll have to pay even after your deductible is met on covered services, and what your co-payments will be. Many plans also have multiple deductibles, including one for in-network services and another for out-of-network care.
During this time, some employees may find that their household size has changed since their last open enrollment period and they can or need to add someone to their plan. If your spouse has their own health insurance option at work, you’ll want to both sit down and compare different offers.
“Financially, it might take some math,” Donovan said. “You want to evaluate the different premiums, deductibles and co-pays.
“It’s even possible that the least expensive option is for everyone to choose their own plan.”
Make sure you know exactly how much your costs will increase by adding another person to your plan. For example, some employers will extend their coverage to a domestic partner, or someone who lives with you but to whom you are not married. But in addition to a higher premium and deductible, the domestic partner benefit will likely result in a larger tax bill for you because coverage is taken into account. as additional income by the IRS.
Some companies will also add a supplement to your coverage if you add a spouse who has their own professional health insurance.
Many employees will notice that the health insurance plans offered by their company do not include dental and vision coverage. Instead, these coverage areas will appear as separate options with their own price tags.
You’ll want to read the benefit details and “do some rough math” to see how much you’ll save by getting the coverage rather than paying full price to the dentist or eye doctor, said Louise Norris, a health policy analyst at HealthInsurance.org.
It’s especially important to pay attention to the maximum benefits the plan will offer, Norris said. If the cap is low, it may be worth paying out of pocket.
Still, while the plan won’t save you a lot of money, she added, “it might be worth joining if you know getting the benefit will be the motivation you need to make your regular dentist and optometry appointments.
During open enrollment, employees will typically also be offered different disability and life insurance options.
“Everyone should sign up for the free life insurance their company offers,” said Carolyn McClanahan, physician, certified financial planner and founder of Life Planning Partners in Jacksonville, Florida. (This benefit is usually a multiple of your salary.)
However, McClanahan said, “If a person has dependents who rely on their income, that’s probably not enough.” »
Although many employers offer the option of purchasing supplemental life insurance, “if a person is in good health, it is often cheaper to purchase one.” temporary insurance in the open market,” said McClanahan, a member of CNBC’s Council of Financial Advisors.
“Plus, you won’t lose your insurance when you leave your job,” she added.
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If you’re in poor health, your life insurance through your employer may be the only one you’re eligible for, McClanahan said. In that case, she says, “make sure you accept it and buy as much as you can.”
Disability insurance is also important, McClanahan said: “If your employer offers it, you should definitely take it. More than 42 million Americans have disabilities, according to at the Pew Research Center.
Short-term disability coverage is very limited, she said: “Everyone needs long-term disability coverage unless they have enough savings to be able to retire s ‘he can no longer work. »
Your employer’s disability coverage may not be enough to support you if you become disabled, and so you should also consider an individual disability policy to supplement your work policy, McClanahan said.
Your employer may offer savings and spending accounts It can lower your taxes and help pay your healthcare expenses for the year, experts say.
During open enrollment, you can choose to put up to around $3,000 into a flexible spending account, For example. Your contribution will be deducted from your salary (and later, from your gross income, which can reduce your tax bill). But at the start of the year, you should have the full amount available for deductibles, co-pays, coinsurance and some medications. (There is also a Dependent Care FSA, which you can use to pay for qualified dependent care expenses, including costs for children 12 and younger.)
Financial experts speak particularly strongly health savings accounts, or HSAs.
“Health savings accounts have a triple tax advantage: you benefit from a tax deduction when you invest money, the money grows tax-free for healthcare and you can withdraw it tax-free ‘tax for all health care expenses,’ McClanahan said.
If you can pay for your health care expenses out of pocket during the year, she said, you can let that money grow tax-free throughout your career and use it to retirement, she added.
Not all workers qualify for an HSA. To be eligible, you must be registered with a high deductible planamong other requirements.
Unlike previous options, you can generally change your retirement savings throughout the year.
Still, earnings season is an opportunity to take stock of your nest egg, experts say.
“Open enrollment can be a natural time to pause and look at the bigger picture,” said Ryan ViktorinCFP, vice present and financial consultant at Fidelity Investments.
People should generally save at least 15% of their pre-tax income each year for retirement, Viktorin said. (This includes matching your employer, if you have access to it.)
Viktorin said she recommends people have at least one year of their annual salary saved by the age of 30 and six times their annual income by the age of 50.
If these numbers are intimidating, focus on the impact that even small increases can have on your savings rate.
For example, a 35-year-old earning $60,000 per year who increases their retirement savings contribution by just 1% (or less than $12 per week) could generate $110,000 more in retirement, assuming an annual return of 7%. according to to an example from Fidelity.
If your company offers to match your savings, do your best to save at least up to that amount. Otherwise, you lose free money and any additional savings accumulated over time.
Before finalizing your open enrollment, make sure beneficiaries are listed on your life insurance and retirement savings accounts.