It’s open enrollment time. Let’s jump in and talk about the top five mistakes you definitely want to avoid this year!
When you apply for a marketplace plan, healthcare.gov will ask you several questions. One of which is to estimate your income for the upcoming year. This can be a challenge for many people, especially freelancers and those who are self employed. When you receive a regular salary, it can be easier to estimate. Perhaps there are bonuses, commissions or a raise to take into account, but you may be able to come up with a ballpark estimate. This can be much harder if you are a gig worker or a small business owner.
Your eligibility for premium tax credits which are the discounts on your monthly premium is determined by your household size and income. If you overestimate your income, you’ll likely be eligible for a larger tax refund when you file. However, if you underestimate your income, you’ll likely have to pay that premium tax credit back when you file. Since premium tax credits can save you thousands of dollars per year, you could put yourself in quite a predicament.
So, it is important to not only estimate your income as accurately as possible during open enrollment, but also update your information on healthcare.gov should there be any changes.
If you are trying to lower your MAGI to make yourself eligible for a larger premium tax credit, you might well be served to work with an accountant.
HSA & HDHP
Another potential mistake has to do with HSAs and HDHPs. There is a lot of buzz surrounding HSAs. HSAs are health savings accounts. Every year the IRS sets a max amount for HSA contributions for individuals as well as families.
So, here’s the buzz. HSAs have a triple tax advantage. The money that you contribute is pretax. So, it will lower your taxable income which can not only save you money when you file, but it may also make you eligible for a larger premium tax credit.
The accounts are interest bearing. That interest is also tax free. And as long as you withdraw funds for a qualified medical expense, that’s also non taxed. The qualified medical expense list is quite long. It even includes purchases like OTC drug or chiropractor visits.
You can even invest a certain portion of your HSA. And if you manage to hold onto it until you are 65 you can use it as a retirement account.
It’s easy to see why HSAs are so appealing. However, they are only available with high deductible health plans. This is not, in and of itself, a bad thing. However, remember, HDHPs are not for everyone.
As the name indicates, HDHPs have very high deductibles. For someone with more extensive medical needs or perhaps younger children, these plans may not be ideal. As great as HSAs can be, it’s still a mistake to prioritize having an HSA over adequate coverage.
This is slightly related to our next of the top five mistakes. It’s very important to keep your priorities straight and not be lured in by the promise of fringe benefits.
All ACA plans must offer the 10 essential benefits.
However, plans can choose to offer additional benefits. During open enrollment, when comparing health insurance there are so many plans that at first glance seem so similar. So it can be easy to be lured in with fringe benefits, for example dental or vision coverage.
For example, adult dental and vision are not essential benefits. But some plans might offer them. It’s important not to make decisions based solely on these fringe benefits. Dental and vision add ons or even private insurance can be quite inexpensive. It’s most important that your health insurance cover you main needs. For example, you should ensure that the network works with your needs. That the premium, copays and coinsurance, deductible and OOP max are comfortable withing you budget. That any prescription you take are covered. And any main benefits that you might need are covered by your plan.
Another very common open enrollment mistake is picking the “cheapest” plan by looking at the premium only. There are several financial factors to take into consideration:
- OOP Max
You premium is, of course, the amount you pay monthly to keep your insurance active. It’s one of the easiest costs to identify. But often times plans with lower monthly premiums may have higher deductibles and copays or coinsurance. That means when you actually need to utilize your coverage, your expenses may be higher.
This isn’t always a bad thing. Afterall, many basic services are covered prior to meeting your deductible and several services have no charge. So, a plan with a lower monthly premium could still save you money. It just depends upon your needs.
And of course, if you are someone with extensive medical needs, a plan with a lower out of pocket maximum even if it has a higher monthly premium might be more helpful.
Waiting Until the Last Minute
Many people procrastinate on unpleasant or stressful tasks. Additionally open enrollment is during the often very busy holiday season. It can be amazing how time slips by, leaving people scrambling to make a decision at the tail end of enrollment.
Do not let this happen to you! You want to leave yourself time to confirm if the doctors and hospitals you need to use are in network. Also, it’s just not a wise idea to make such an important decision hastily. And if you do decide to work with an agent or broker, the longer you wait, the more difficult it may be to get an appointment.
Many people have found themselves having to hastily make a very important healthcare decision and are left with a year of major regrets. If you select a plan with inadequate coverage and end up with large medical bills, there could be severe and long lasting results.
Health insurance is confusing. It is so easy to make a mistake, miss something important, pick an inadequate plan. The language and technical jargon can often be incomprehensible. So please, work with an expert. Don’t attempt to do it all by yourself. It’s just not necessary.
Please plan ahead and make an appointment with a trusted broker. You will not pay more. Although some brokers do charge a fee for their services, many do not. So, you can often get expert assistance with absolutely no charge to you.
Jesse Smedley is the Principal Broker for iHealthBrokers and the founder, president, and CEO of Smedley Insurance Group, Inc. and iHealthBrokers.com. Since the inception of SIG in 2007, Jesse has been dedicated to helping people save money on their health insurance by providing them with resources to educate themselves on all their health insurance options, both under age 65 and Medicare beneficiaries. He is featured in many publications as well as writes regularly for expert columns regarding health insurance and Medicare.