Open Enrollment: Keeping Your Health Insurance Affordable and More

It's that time again… open enrollment season and with it, a lot of decisions to make for the upcoming year.

Today, we're going to go over how you can maximize your benefits, especially when it comes to health, dental, and disability insurance!

Choosing Your Health Insurance, Dental, and Disability

If there's one area of finances where families have a hard time -either they're not maximizing or they misunderstand it- it's open enrollment season. It's that time of year where HR sends you a packet of information about your benefits.

One of the big things that I want families to focus on- especially busy ones- is going for the big wins.

Yes. It is beneficial to get better financial habits and cutting those unnecessary expenses, maybe five or $10 here and using that money towards more impactful family and financial goals.

But going for the big wins means that for a little bit of time and effort, you can have reoccurring winds or see a significant drop in your expenses or increase your savings. This is where open enrollment fits in.

For this limited window that you get this information, you're going to be making some significant financial decisions for the upcoming year. The biggest one for most families, health insurance. What makes us extra challenging is we're doing this in the midst of still dealing with COVID.

All this week and next, I want to make things easier for you so that you can focus on the key discussions you need to have so you can make the best choices for your family's particular needs.

I'll be releasing on the site previous episodes where I've talked with certified financial planners about the ins and outs and details about your options.

Today we're going to focus more on a Q and A style approach. Based on your feedback, along with what I'm seeing on my side with Google search in the community chat, I'm going to go over those questions that families often have as they're sorting through the paperwork.

Our focus today will be on:

  • weighing the pros and cons of health insurance plans
  • why disability insurance doesn't get the credit it deserves
  • how tax advantage accounts like HSAs and FSAs can help you save a significant amount of money

Are you ready?

Let's get started!

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Prioritizing Your Time with Open Enrollment

Along that theme of going for the big wins, if you have the time, please sit down and review all your benefits.

The one that's going to have a significant financial impact is your insurance, particularly your health insurance.

What are the big decisions we should be focusing on with open enrollment?

Even if everyone in your family is relatively healthy, healthcare can take a huge bite out of your family budget. Ideally you want to get a health plan that fits your family's need while still being at an affordable rate.

After you decide what health insurance plan you're going to go with, then you may have additional considerations.

If you're going for a qualifying high deductible health plan. Then you're going to be examining the health savings account and how much you want to put in. If you're going with a traditional health insurance plan, Then you might want to consider going with a flexible spending account.

With those in place, then the two of you can discuss, are there any other accounts you can take advantage of? If you're parents then the dependent care flexible spending account could be a huge one for you.

Might not sound exciting, but disability insurance is something important to consider.

Like most insurance, it's not really something that you consider important until you need it.

I know a few people that have had to use it and they were relieved that they had that protection.

Finally you have dental and vision insurance. Which is something that we'll get into a little bit more. You want to make sure that you're actually using the benefit and that the numbers make sense.

Now you may have noticed, I didn't mention 401k's. I do believe that if you are going to review all your benefits, you might as well check your account, make sure everything is aligned the way that you want it. But unlike the other decisions,

401k's are much easier to check throughout the year. So if you had to prioritize your time and attention, I would suggest starting with your insurance and then working your way down from there.

Don't worry next week, we're going to get into your 401ks so that you can make sure your investments are aligned with your risk tolerance and your financial goals!

What are the biggest mistakes we need to avoid when it comes to choosing healthcare plans?

I think by far the root of a lot of mistakes is getting overwhelmed. I've seen families rush into a decision. Either they keep that same plant. Not necessarily because they're happy with it. But it's something that they're familiar with and it's easy.

On the other hand, I've also seen families. Just go with the cheapest option. Because they're sick and tired of paying these premiums and they feel like they're not getting the value out of it. But they're not really running the numbers themselves.

Neither one of these is a good approach. At best you could be leaving money on the table or worse. Not getting the coverage you need. So you want to take the time and make this investment of examining your options.

I'll give you a heads up, You're going to be hearing this a lot, which is run the numbers yourself.

Your insurance decisions, especially with health insurance will have a significant financial impact for better or worse. This is something you should slow down and make sure you weigh the pros and cons.

I believe that will put you in a better position to make the best choice for you and your family.

The premiums with the high deductible health plan are much cheaper than we have now. Should we switch?

First off, I can't answer that question because there's so many different factors to consider besides the cost of your premiums.

I can however, relate to looking at the numbers and not feeling like you're getting the value out of your health insurance plan.

That was the situation for us a few years back. We have two kids relatively healthy and basically I use the health insurance at that point. Just for well visits. So even though we had the basic family plan, if still felt like a lot of money was coming out, every paycheck to cover that. And we hardly used it.

Then my husband's job offered a high deductible health plan paired with a health savings account. Just looking at the out-of-pocket premiums we knew there could be significant savings.

However we did not sign up for that plan the first year. Instead we watched for that whole year. What our actual costs were and we ran the numbers ourselves. We ended up switching the year after. But we wanted to make sure that we can handle it because with a high deductible health plan, A lot of the burden is shifted towards you.

Besides the deductible, you have to look at your out-of-pocket maximums and your co-insurance. Would you be able to financially handle this added burden?

A huge help with the high deductible plan. Is going with a health savings account. And for us, what we did is we took the difference that we were saving from the premiums of the traditional plan and moving that to an HSA.

Not only is that an account that has many tax advantages, pretax dollars, it grows tax free and you can use it for qualifying medical expenses tax-free. That money that's not used, can roll over and grow unlike a flexible spending account.

Contribution limits for a family plan in 2022 is $7,300 and depending on your employer, you might get a bonus. For example, my husband's employer will kick in an extra $1,200 a year.

So, yes, I do get the appeal of going with a high deductible health plan but please run the numbers yourself to make sure that it makes financial sense for your family.

Is dental insurance worth it?

The honest answer is it depends. Like everything with personal finance, that's what it is. It's personal.

I feel like I should make a t-shirt out of this phrase, run the numbers, but it's true. For our family, we did kind of a hybrid system. So my husband is on his employer's plan, but for us, we talked with our dentists and they had a plan that is actually cheaper for us to prepay them for the year directly and then that takes care of the rest of us.

And really That's what it comes down to is not just saving money to save money, but making sure you're getting the best value out of that.

What is the best way to figure out the math with accounts like an HSA, FSA, or Dependent Care FSA?

I think at first it does seem intimidating to run the numbers yourself, but a simple and effective solution is using a money management app.

I know we've discussed several and I'll include a few options in the show notes, but these can really make it easier to pull the numbers for the past year or two and make sure that you're getting a clear idea of what you're actually spending.

With the regular FSA and the dependent care. You're trying to find that balancing line where you're setting aside enough money. Again, this is going to be pre-tax money, which is great. For those expenses that you're going to use because you're not going to be able to roll them over.

For the most part that's what we did when we were making that decision to go with the high deductible plan or not. We looked at the numbers, not just doctors visits, but also prescriptions.

That's where I see the real benefits of having a money app, track the numbers for you. You can go in and filter out expenses so you can have a report and see for yourself. Here's what we're spending each year on medical related expenses.

Knowing your numbers can really empower you and make you feel more confident. As you make the decision that's best for your family and your situation.

Is it okay to skip disability insurance?

Is it okay to skip disability insurance?

Something that I recently started appreciating is just how important disability insurance can be. So I'm going to switch things just a little bit.

I'm going to play a snippet of a conversation I had with Matt Miner last year. That explains the role that disability insurance can have and giving you some financial peace of mind.

Elle: I do want to talk to you about disability insurance, because I've had two friends within the last seven years, use it relatively healthy and something happened. They didn't realize it was needed until, you know, thankfully they had that benefit.

So could we go over how disability insurance works?

Matt: Yeah. And I guess I'm going to go off script a little bit here and talk about both employer provided and private disability insurance, with the disclaimer that I don't sell the latter, but I do recommend it for anyone who still thinks that getting a paycheck is quite important. So that's basically anybody who's, not yet financially independent.

So when you think about employer provided disability insurance, you're typically going to see this offered as short term and long-term disability insurance.

It depends on the kind of company that you work for. Some employers just automatically cover a certain portion of short term disability. So you want to read about that.

Others want you to sign up for something and so taking the short term disability one first. In general, if there's a premium associated with that, unless it's just incredibly low, like almost insignificant in your paycheck, you're going to want to handle any short term disability needs that you have through your emergency fund.

So your emergency fund should be three to six months of expenses at least. If you're extremely highly compensated or have a really high budget, you might even push that towards 12 months.

But in any case, you've got, say three to 12 months of expenses in cash. That's going to let you handle any short term disability or get through any elimination period on your long-term disability policy.

Now, when it comes to a long-term disability policy, again, my opinion is that everybody needs this and most people probably need at least some that is separate from their employer.

So you look at what the employer offers. It's typically going to be in the neighborhood of 60%. Of your gross pay. And then you need to recall that when it comes to employer provided disability insurance, that's going to be fully taxable to you as income.

So not only, is it of course less than your gross pay, but it is also going to get taxed before you get the money. When you buy disability insurance privately, you're going to pay with after tax dollars. And so you're going to receive after tax dollars, from that policy.

So that's, that's how I think about, about both short term and long-term disability insurance, and how I think about whether it's coming from the company or whether it's something that you buy on your own.

As I mentioned, that's just a snippet from the conversation I had with Matt. I have the episode back on the site. So if you want to listen to the entire interview where we dive into insurance, please do so I think it's a great investment of your time.

The episode itself is about 25 minutes. So it's not going to take up a lot of your time, but it can give you a lot of information. So you can weigh the pros and cons of your options.

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