Prepare to give thanks, my friend, because that special time of year is here: open enrollment season, when employers let you make changes to your health insurance coverage. If you're thinking major snore, think again. Companies are constantly tweaking their offerings, and that affects your bottom line. Carve out some time to make sure you have the right coverage at the right price. You might reap substantial savings.
If your employer offers a flexible spending account (FSA), you are crazy not to look into it. FSAs are available for healthcare expenses and dependent care. Both let you put pretax money into a separate account: Money from a health FSA can cover insurance co-pays, deductibles and medication, while a dependent-care FSA can be used for childcare (under age 13) and adult care for someone you claim as a dependent.
Give Your Health Insurance a Checkup
Employers today are laser focused on managing their costs, and increasingly that involves shifting more of them onto you. But you have a few money-saving moves at your disposal:
- Look past the premium. You also want to factor in the cost of your deductible, office visit co-pays, coinsurance and charges for covering a spouse (see figures below). Know your plan's out-of-pocket maximum. While I hope you have eight months' living expenses in an emergency fund, you should, at the very least, have enough tucked away to cover that amount.
- Keep your doctors in network. Some plans are moving toward narrower networks in an effort to manage costs. Check to see whether your favorite docs are still in network; if not, now is the time to interview new ones. Hate to switch? Find out what your maximum out-of-pocket will be if you go out of network. If that amount reduces your emergency savings to less than four months of living costs, I'd urge you to reconsider.
- Consider a steeper deductible. Many employers now offer high-deductible health plans (HDHPs) as a way to control rising costs. Yes, they may sound scary, but these plans let you set aside pretax money in a Health Savings Account (HSA) that you can use to cover many healthcare expenses (however, you are not eligible to contribute to a healthcare FSA in the same year). Unspent funds keep growing tax-free year after year. Even better: most employers "seed" employee HSA accounts; the average contribution last year was nearly $950.
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