It’s fall, and that means the leaves changing. Your health insurance might be changing, too.
Over the last five years, premiums for family plans have jumped 19 percent, even though earnings are up only 12 percent, according to the Kaiser Family Foundation. Deductibles are marching upward, too, even among PPO plans. Overall worker contributions to their health care costs continue to rise.
With open enrollment upon us, millions of Americans will select their 2018 employee benefits, including health insurance, in the next few weeks. But many will give little attention to their options, and that could cost them dearly.
One in five people did not research their benefit plan at all, according to a 2017 Aflac study, while 83 percent spent less than an hour. In fact, most employees simply continue with their current plan and miss out on hundreds of dollars of savings, Aflac says.
You may have an easier time starting your Christmas wish list, but you can’t afford to err on your benefits selections. Here’s what you need to do.
More than a third of employees are unprepared to pay the out-of-pocket costs from a major medical emergency. And Bankrate found that only 41 percent of Americans would finance a large unexpected cost out of savings.
In order to protect yourself, first, check on your emergency fund. You should have at least three to six months’ worth of expenses in a high-yielding savings account, and that includes health insurance. If you need emergency surgery, and hit up against your deductible, you want to be able to pay in cash rather than go into debt. This is your best hedge against high insurance costs.
Your health care needs will determine whichever plan you ultimately select, either from your employer-sponsored insurance or on the individual marketplace. Younger, healthier workers should consider plans with lower premiums and higher deductibles since they’re unlikely to need a substantial amount of ongoing care. Higher premiums make more sense if you expect to consume a good deal of care and want the deductible to kick in quicker.
Make sure that your doctors are still covered by whichever insurance plan you chose. Insurers, along with shifting costs to consumers, are narrowing the networks of covered providers. And pay close attention to which prescription drugs are covered by looking into each plan’s formulary.
You might even consider a health savings account. Although you’ll have a higher deductible, each dollar saved in an HSA is thrice tax preferred: when you save, when you invest, and when you withdraw. Given that health care costs for retirees are only mounting, having a cache of HSA funds compounding over a couple of decades can be a good idea.
Tally up your health care costs last year, including premiums, to get a sense of what you’d pay if you pick an HSA. But make sure you actually use it. Only one in eight accounts maxed out their contributions last year, according to the Employee Benefit Research Institute. In 2018, a family plan allows you to save $6,900, with maximum out-of-pocket expenses totaling $13,300.
Flexible Spending Accounts
With a flexible spending account, you can grow your medical savings with your pretax income. Check your employer’s benefits package to see if they offer one, because it can save you thousands of dollars in taxes.
There are two types of FSAs: Dependent care FSAs, which can be used to pay for the care of any child under 13 that lives with you for more than half the year, or for a spouse or other dependent who needs services such as elder day care; and health FSAs, which help people pay for out-of-pocket medical expenses.
In 2018, a married couple filing jointly can save up to $5,000 in a dependent care FSA, which is worth $1,250 if you’re in the 25 percent tax bracket. Employees can also save up to $2,650 in a health FSA, which would save almost $700 for the same tax filer.