Cody Sims: What you need to know during this year’s ‘Open Enrollment’ period
We are entering open enrollment season – the annual time when you have the opportunity to make changes to your benefits package. If you’re like most employees in the United States, open enrollment may be the only year-round opportunity you have to change your health care benefits.
Health insurance can seem complicated because there are so many moving parts. It is useful to
Understand the various terms and acronyms you’ll likely encounter when considering your options. Here are some of the most common.
Any form of insurance coverage involves the payment of premiums, which is basically the amount you and your employer pay your insurer each month for your health insurance. Today, most employer-based health insurance requires you to pay a portion of the monthly premium for coverage. The payments you need to make are usually deducted from each paycheck.
Many insurance plans include a deductible. In the case of health insurance, this is the total amount you must pay (usually in a given year) before your health insurance takes over the costs. For example, a plan with a $1,000 deductible would require you to pay all bills up to $1,000 out of pocket before insurance coverage takes effect.
This is a fixed amount that you pay each time you use a medical service. For example, each visit to the doctor may require a co-payment of $20. If your insurance plan includes copayments, this amount is required even if you have reached your deductible for the year.
HMOs and PPOs
These are two different forms of health insurance coverage. HMOs are health maintenance organizations, which are often available for lower monthly premiums, but with certain restrictions. For example, most require that all of your health care needs be coordinated by your attending physician. With HMOs, you are also usually limited to the services of a specific network of providers covered by the plan. PPOs are preferred provider organizations, which tend to have higher premiums than HMOs. With PPOs, referrals from your primary care physician are generally not required and you generally have more flexibility in choosing providers.
Health Savings Accounts (HSA)
Some health insurance plans have an HSA feature. This allows you to set aside money on a pre-tax basis to pay for eligible medical expenses. You can use the savings account to cover expenses related to deductibles, copayments, and other out-of-pocket medical expenses. By using pre-tax dollars, the net cost to you of these services is reduced. HSAs also automatically carry over any unused funds each year for future use, even in years from your retirement.
High Deductible Health Plan (HDHP)
These plans are offered in conjunction with an HSA. HDHPs are often available for a lower monthly premium, but, as the name suggests, require you to carry a higher deductible. Much or all of the deductible may come from the money you have set aside in the HSA. If you anticipate few major health care needs, HDHPs may be a smart option to keep your premium costs down.
Flexible Spending Accounts (FSA)
This benefit option allows you to pay for many out-of-pocket medical expenses with tax-free dollars. You set aside money in an FSA with each paycheck on a pre-tax basis. The accumulated funds can be used to cover the costs of copayments, deductibles, qualified prescription drugs and certain other medical expenses. Most of the money must be used before the end of the year, but your employer may allow you to carry it over for a short time to the next year or include a provision that allows you to spend up to $500 of this year’s FSA savings in subsequent years. year. Be sure to check with your benefits provider if you have any questions about your plan details.
Making the right choices for your situation can result in better coverage than you have today and potentially save you hundreds or even thousands of dollars a year. It is worth considering your options carefully and choosing the most appropriate plan for your needs.
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Cody Sims, CRPC, AAMS, AWMA, is a financial advisor and franchise owner at Ameriprise Financial Services, LLC. in Chattanooga, Tennessee. He specializes in fee-based financial planning and asset management strategies and has been practicing for 27 years. To contact him, ameripriseadvisors.com/james.e.sims, 423-648-2900, and 412 Georgia Ave., Suite 210, Chattanooga, Tn. 37403.
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