By Brian Ellenbecker CFP®, EA®, CPWA®, CIMA®, CLTC®

Make the right open enrollment decisions to avoid severe consequences.

Open enrollment can be one of the more confusing times of the year. The decisions that need to be made are often complex, can be confusing, and could carry severe consequences if the wrong decision is made or you don’t complete enrollment in a timely fashion.

Here are a few points to consider as you review your coverage:

IF YOU ARE WORKING & RECEIVE BENEFITS THROUGH YOUR EMPLOYER:

• Evaluate your health insurance choices:  Many companies offer both a traditional health insurance plan with a low deductible, and a high deductible plan (HDHP). Carefully evaluate which is best for you.  If you enroll in a HDHP, you will likely be eligible for a Health Savings Account (HSA). The maximum contribution limit for a HSA account in 2021 is $3,600 for individual coverage and $7,200 for family coverage. In 2022, those amounts increase to $3,650 and $7,300, respectively. Account owners over 55 can contribute an additional $1,000 (if you and your spouse are age 55, each of you can contribute an additional $1,000, but must each have your own account). In contrast to a Flexible Spending Account (FSA), an HSA account balance carries forward into future years.  Consider paying for medical expenses out of pocket to allow the dollars in your HSA to continue to grow tax-free for a longer period. It can be a primary resource for paying for health expenses in retirement, especially as expenses related to Medicare continue to increase.
  • Many companies have started to add either incentives or additional costs for certain behaviors. For example, if you hit certain health metrics or perform certain activities, they may reward you with a lower premium.  Some companies may choose to charge you more if you don’t do certain things. Be aware of what incentives or penalties exist for certain activities and make sure all family members that are on the plan are doing what they need to do to minimize costs.

In addition to health insurance choices, you will have other benefit decisions to make, including:

• Company paid life and disability insurance:  Many companies offer and pay for life and disability insurance for their employees. Pay attention to the details of this coverage.  If additional insurance is offered, evaluate if you need the coverage and if the price is competitive to what you could pay for individual insurance.  Oftentimes, the cost is very competitive, and underwriting is not required in most cases.
• Retirement Plans:  Make sure you are maximizing the amount you are contributing to your employer sponsored plan.  For 2021, those under 50 can contribute $19,500, while those 50 and older can contribute up to $25,000.  If cash flow doesn’t allow you to maximize your contributions, make sure you are contributing enough to take full advantage of your employer’s match.  If you don’t do this, you are turning down free money.
• Beneficiary Designations:  Review the beneficiary designations on your employer benefits annually to ensure they still align with your estate plan.  Oftentimes, you have to check multiple locations to confirm this information.

Please let us know the details of your employee benefits.  They are an important piece to your financial puzzle. 

IF YOU HAVE INDIVIDUAL HEALTH INSURANCE:

Open enrollment for people who have individual insurance through the Health Insurance Marketplace runs from November 1 to January 15 with coverage starting January 1, 2022 for people who enroll by December 15.  It is important to review your coverage each year. Not only do plans and prices change, but if you receive tax subsidies, you should update your expected income to determine if any of those subsidies will change for 2022.

The premium tax credit increased substantially for coverage years 2021 and 2022.  If a Marketplace plan was not originally a good option for you, take a look again, because it’s likely the premiums will be cheaper than in the past due to the expanded premium credits available to most people.

Visit https://www.healthcare.gov/ for more information.

If you have health care coverage through the Marketplace and are receiving a subsidy, make sure to let us know the details so that we can incorporate that into your tax planning for 2021 and beyond.

IF YOU ARE CURRENTLY ENROLLED IN MEDICARE:

If you have a Part D Prescription Drug Plan:

Open enrollment for people who have a Medicare Part D Plan runs from October 15 to December 7, with the new coverage starting January 1, 2022.

• Review any information you have received from your Part D provider. Coverage CAN change from year to year.
• Evaluate your health changes and any new prescriptions that you may be taking.
• Use Medicare’s “Plan Finder” at https://www.medicare.gov/plan-compare/#/?lang=en&year=2022 to evaluate if there is a plan that will give you better coverage for a lower premium than the current plan you have.  Have your prescription information (drug name, dose, and quantity) ready as the tool will prompt you to enter each prescription.  You will also be asked to enter your preferred pharmacy.  Note that the pharmacy you choose can have a significant impact on the drug costs for each plan.  The results will list your actual plan cost for each Part D plan available in your area.

Let us know details of your new coverage and your monthly premium. 

If you have a Medicare Advantage Plan:

Open enrollment for people who have a Medicare Part D Plan runs from October 15 to December 7, with the new coverage starting January 1.

• Review any information you have received from your provider. Premiums, deductibles, and coverage networks may have changed.  Your current provider is required to send you a notice outlining all of the changes for the following year.
• Evaluate your health changes to determine if this coverage is still the best for your needs.
• Use Medicare’s “Plan Finder” at https://www.medicare.gov/plan-compare/#/?lang=en&year=2022 to evaluate if there is a plan that will give you better coverage and/or lower your premium when compared to your current plan.
• If you decide that you’d rather switch from Medicare Advantage to Original Medicare, you may also do that during the Medicare Open Enrollment. (Details on the differences can be found here: http://www.viewfromthelake.com/traditional-medicare-vs-medicare-advantage/?share=email&nb=1.)  NOTE: If you switch from a Medicare Advantage plan to Original Medicare you will also need to shop for a Medicare Supplemental Plan and a Prescription Drug Plan.  You will need to answer health questions to enroll in a Medicare Supplement Plan outside of the Medigap Open Enrollment Period (which is the 6-month window after you enroll in Part B).  If your answers are not satisfactory to the insurer, you can be denied coverage for a Supplement Plan.  Never cancel your current coverage until you have secured new coverage.

Let us know details of your new coverage and your monthly premium.

Reviewing open enrollment coverages and benefits is often a dreaded task, (akin to filing tax returns and going to the dentist). But remember, we are here to help you make it not-so-terrible, after all… and just think how great it will feel to have that checked off your to-do list.