For many Americans, open enrollment is happening now. Open enrollment is a period each year where employees are able to make changes to their employer-sponsored or state-run marketplace health insurance plans. The 2016 Healthcare.gov open enrollment period lasts from November 1, 2015-January 31, 2016.
Regardless of where you go to get your insurance, this is an excellent opportunity to review your healthcare needs and costs and make adjustments to ensure you are getting the best value. Here are five questions to ask yourself before you make next year's selection.
Was I Happy With My Coverage Last Year?
The first question you should ask yourself should reflect on your coverage from the previous year: Were you happy with your coverage? Did it meet your needs? Were you able to choose a doctor you like and do you want to keep everything as is?
In some circumstances, you may need temporary insurance. Most commonly, this happens if you are changing jobs or signing up for a new health insurance plan and need short-term coverage until your new coverage starts. For these situations, you might consider a short-term coverage solution.
If your job is not changing, you can most likely keep your health plan from last year. Many people do this by default, but then complain when they run into the same frustrations, such as limited provider options or customer service hassles, as they did in prior years. Generally, if you were happy last year, you will want to keep things similar to last year's plan. If you were unhappy, consider a change.
How Much Did I Spend on Health Care Last Year?
Some people are surprised by how much they actually spent on healthcare in the past year. Often, the actual spend is quite a bit more, or falls far short of what they expected. If your health insurance plan does not line up with your healthcare needs, you may be able to save money by changing plans. However, you need to know your actual spending in order to do so.
Some insurance providers give you a summary of all spending by year when you log into your account on the insurer's website. If you do not have this option, try using a tracking program like Mint.com or Personal Capital to help you understand and manage your finances. One benefit to using this kind of software is the ability to organize your spending by category. These sites are also both free to use.
Do I Anticipate Any Major Changes or Events Next Year?
If you expect your healthcare needs and income will be similar to last year, you can just look at last year's spending to judge your expenses for the new year.
If you are planning a pregnancy, and changes to dependents, or any major surgeries next year, you can plan on increased expenses, and should consider changing your health plan if needed to accommodate the additional costs.
Should I Use an HSA or a Flexible Spending Account?
Some employers offer options to lower your out-of-pocket health care costs by paying for your health-related expenses with pre-tax dollars. The most popular way to do this is through a flexible spending account or a health savings account.
A Flexible Spending Account (FSA), or flexible spending arrangement, is most commonly funded by pre-tax deductions from your paycheck. Each payday, a certain amount that you choose is directly deposited into your FSA, and you can use those funds to pay for any qualified healthcare expenses you incur in the same calendar year. As of 2014, employers have the option, but do not have to allow participants to roll over up to $500 of unused funds at the end of the plan year.
If you are signed up for a qualifying high deductible health plan, you can get a similar benefit from a health spending account, commonly called an HSA. An HSA lets you put money away pre-tax for qualified healthcare expenses. Many insurance plans do not qualify you for an HSA, but if you can use one, they are a great way to save. Any unused balance at the end of the year carries over to the next year, is portable, and can even be used in retirement so you do not have to worry about losing your savings.
Am I better off with an HMO or PPO?
Once you have your spending figured out, the last decision to make is whether you prefer an HMO or PPO plan. Not all employers give the option to choose, but if you can, you should note that these plans all work very differently.
An HMO, or health maintenance organization, combines your insurance company and doctor into one. The company you pay for your coverage employs your doctors. This gives you fewer options, but HMO plans might be more affordable with low co-pays and low-cost or no deductible. However, HMO plans require member to see in-network providers in order for services to be fully covered and must get a referral to see a specialist.
A PPO is a preferred provider organization. With a PPO, you choose your own doctors. If you pick one within your insurance company's network, you get a bigger discount. If you go out-of-network, you pay more.
Make the Best Decision for Your Needs
As with any insurance decision, there is no overarching right or wrong choice, as everyone's needs and financial situations are different. Picking an insurance plan is an important decision, and doing so with good information and an understanding of your needs will lead you in the right direction for your health coverage next year.
