Health care is part of the foundation of your financial picture, and without health insurance, it could be easy to lose everything you’ve worked so hard to obtain. In fact, according to several studies, the No. 1 cause of bankruptcy in the United States is medical costs. Whether you have health insurance through your employer or have to navigate the complicated waters of health care entirely on your own, you need to understand some basic concepts about health insurance open enrollment. Here are the top seven things to know as open enrollment season approaches:
1. You can only enroll in a new health insurance plan or make changes to an existing plan during open enrollment.
As a licensed insurance broker in Colorado, I have found that many people are confused by open enrollment. Open enrollment is usually a month long if you work for an employer. If you’re buying private health insurance, open enrollment lasts from Nov. 1, 2015 to Jan. 31, 2016. The one exception to this open enrollment window is if you have a life change event.
2. You can change your plan outside of open enrollment only if you have a life change event.
Having a qualified life change event (LCE) is the only way you can change your existing plan or enroll in a new one outside of open enrollment. Some common LCEs are moving, getting married or divorced, and losing your coverage through your employer. Losing your private coverage by not paying your premium, though, is NOT an LCE!
3. Help is free.
If the topic of health insurance makes your eyes glaze over, why not hire a broker to help you? Brokers are paid by the insurance carrier, which has no impact on the price you pay. A broker should have a good understanding of the plans in your area, and can make recommendations based on your situation and needs. If your employer offers health insurance, seek help from your company’s benefits department.
4. It’s important to understand basic health insurance lingo.
If you understand a few key terms, you’ll understand a lot more about how your plan works, and be able to get the most out of it. Here’s a quick cheat sheet:
- Co-pay: This is the amount you’ll pay each time you see your doctor, go to the emergency room, or pick up a prescription..
- Deductible: You are responsible for 100 percent of costs until this amount has been reached.
- Out-of-Pocket Maximum: This is the highest dollar amount you will spend each year, and includes the deductible. Once you’ve spent this much in a calendar year, the plan takes over 100 percent of the remaining costs.
- Coinsurance: This is the percentage of costs for which you are responsible before you reach your out-of-pocket maximum. Coinsurance kicks in between the deductible and the out-of-pocket max.
- In-Network vs. Out-of-Network: One of the most important concepts to understand is staying “in-network.” That means checking to make sure your doctor, your clinic, your hospital, your pharmacy, and/or the lab where your blood work gets sent are in your health plan’s network. If not, you could pay dearly. Don’t assume on this one! You can always call the 800 number on your ID card to double check in-network status.
- HMO vs. PPO: An HMO is a limited network or its own network of doctors within a system (for example, Kaiser Permanente). In other words, if your health insurance is an HMO, you can’t just go to whatever doctor or hospital you want to. A PPO network is a larger network of doctors and hospitals that allows for more choice; you are not locked into a system of providers. You may also run across the EPO network — this is sort of like the PPO but the network is much more limited, and usually has no out-of-network coverage.
5. Know the difference between HSA and FSA contributions!
I love the HSA, which stands for health savings account. This is ideal for healthy people who don’t use the health care system much. If you have a high-deductible plan that is “HSA compatible,” you can have an HSA account at a bank that you can contribute up to $3,350 to in 2016 as a single person and $6,750 for families. After a year or two of contributions, this will add up to a medical emergency reserve that will cover your higher deductible when needed. Your contributions to your HSA account are pre-tax, and are yours until spent — no expiration date. You can also use them to see alternative practitioners like the acupuncturist or chiropractor.
The FSA, or flexible spending account, is offered through your employer. You can use these dollars just like you can use HSA dollars, and can also use them for dependent care (i.e. day care). The caveat is that, unlike HSA dollars, FSA dollars typically do not roll over to the following year, so you must use them or lose them. This means you shouldn’t load up your FSA account if you won’t have expenses to use the money for. This link for a Kiplinger FSA calculator can help you figure it out.
6. Find out if the Affordable Care Act will benefit you.
Since the passing of the Affordable Care Act, a lot has changed in the land of health insurance. The main things to know are that there is no cap on what a plan pays out to you for medical costs, preventative care is included as a free benefit, and that you can’t be denied insurance for a preexisting condition or for being pregnant. Another huge benefit the ACA brought many is help with paying premiums. If your income is less than $40,000 as a single person, and you don’t have affordable coverage through your employer, you may qualify for premium assistance. Check out HealthCare.gov to find out if you qualify.
7. Watch out for penalties!
If you don’t have health coverage via an ACA-compliant plan, you will pay a penalty. That penalty in 2016 is 2.5 percent of income, or $695 per person — whichever is higher. The penalty for a child not on an ACA-compliant plan is half this amount. You can find more about penalties on HealthCare.gov, which has a great search feature on their website.
Remember that your health is your greatest asset, so always take good care of it! Be safe when it comes to physical activity, make sure you are managing stress effectively, exercising, not smoking, eating well, and watching your sugar, alcohol, and processed food intake — and don’t forget those vegetables! As with any kind of insurance, you don’t WANT to have to use your health insurance, but it’s critical to have a plan in place to protect yourself in case of an expensive illness or health condition.
Addie McHale is a member of the DailyWorth Connect Program. Read more about the program here.